The arrival of the last oil tanker carrying crude from the Middle East to California this week has state lawmakers on edge, and an energy expert warning of a gas price “crisis.”
Democratic and Republican assemblymembers grilled the California Energy Commission on Tuesday as they try to figure out what can be done to replace the 30% of the state’s oil typically imported from the Persian Gulf.
America’s war with Iran has closed off the Strait of Hormuz, and that tanker was the last to depart the region for California before war broke out. The state has no interstate gas pipelines and is heavily reliant on imports.
State lawmakers are hoping that the strait reopens soon but asked what would happen if it stays closed for the next 60 days.
Severin Borenstein, a UC Berkeley professor famed for his coining of California’s “mystery gasoline surcharge,” warned lawmakers that “it would be a crisis.”
He said prices of oil could go up to $40 or $80 a barrel, meaning Californians already facing the nation’s highest gas prices could see up to two dollars more per gallon — a total of eight dollars per gallon on average, stretching into nine.
“I don’t think that’s implausible at all,” Borenstein said. “I think that would be a crisis, and it would be completely out of control of the state of California.”
Siva Gunda, vice chair of the energy commission, acknowledged that the state is facing a crisis. He said, however, due to lower demand from high prices that the prices should stabilize under $7 per gallon in the near term.
Gunda said the supply of oil should be good within the next six weeks, but if the crisis continues after six weeks, exposures to price increases could become concerning.
“That’s something we need to closely watch,” he said.
Gunda said he is in private conversations with industry for an emergency plan beyond those six weeks.
“So as we move forward, it’s really about making sure more ships are coming, more marine vessels are coming” with imports, he said.
All sides seemed to acknowledge the oil industry’s criticism of Democratic policies that have discouraged oil production in the state. That needs to be addressed, lawmakers said, to not be so reliant on imports.
“Is it completely unnecessary for us to have an actual target of what we’re going to be producing in California to control our own destiny?” said Assemblymember David Alvarez (D), who earlier questioned about putting all of California’s “eggs” into the “basket” of imports.
Gunda noted that having domestic production won’t necessarily reduce prices, pointing to other countries with such capacity but still being affected by elevated prices.
However, “they would make sure that the California refineries can run efficiently,” he said, and can help ensure California can go through crises like the current one.
Oil groups repeated their demands to lawmakers to fix California’s antagonistic policies.
“We’ve seen the outcome. Refinery closures, increased dependence on imports, and a system with very little margin for error when disruptions occur,” said Jodie Muller with the Western States’ Petroleum Associaton.
