California gas is getting more expensive. A war with Iran would cost you dearly

The US attack on Iran is expected to have an unwelcome impact on California drivers – a jump in fuel prices that could be felt at the pump in a week or two.

The outbreak of war in the Middle East, which has almost shut down the vital shipping route of the Persian Gulf, boosted the price of Brent crude oil by as much as $10 a barrel, with prices reaching as high as $82.37 on Monday before settling.

The international standard price sets what drivers pay for gas around the world, including in California, with every dollar increase translating to 2.5 cents at the pump, said Severin Borenstein, director of the Energy Institute at UC Berkeley’s Haas School of Business.

That would mean motorists could pay at least 20 cents more per litre, although how much damage the dispute will do to wallets remains to be seen.

“The real issue, however, is that the oil markets are just guessing what’s going to happen. It’s a time of great volatility,” said Borenstein. “We don’t know if the war will extend or end quickly, and all those things will create a price for nothing.”

President Trump has hailed the reduction in gas prices across the country as a vindication of his economic plan despite concerns about a weak job market and lingering inflation concerns.

The turmoil in the Middle East can be felt very strongly in the government.

Californians already pay more for gas than the rest of the country, with an average cost of $4.66 a gallon, up 3 cents from last week and 30 cents from last month, according to AAA. The current national average is about $3 per gallon.

The disruption in international markets also comes as refiners switch to producing gas that includes California’s summer, which is less volatile during the hot summer. The switch would raise the price of a gallon of gas by at least 15 cents.

Prices in California are largely driven by higher taxes and the cleaner, less polluting compound required year-round by regulators to combat pollution — and it’s long been a hot button issue.

The politics were only exacerbated by recent refinery shutdowns, including the Phillips 66 refinery in Wilmington in October and the shutdown and restructuring of the underperforming Valero refinery in Benicia, Calif., which reduced refining capacity in the state by about 18%.

California has also seen a steady decline in its crude oil production, making it more dependent on imports of oil and gasoline.

By 2024, only 23.3% of the state’s refined crude oil was pumped from California, while 13% came from Alaska and 63% from other parts of the world, including about 30% from the Middle East, said Jim Stanley, spokesman for the Western States Petroleum Assn.

“We could see a drop in inventory and real price volatility” if Middle East supply is disrupted, he said.

The Strait of Hormuz in the Persian Gulf, through which about 20% of the world’s oil passes, was almost closed on Monday, according to reports. Although it produces about 3% of the world’s oil, Iran has great power in the energy markets because it controls the economy.

Also, in response to the US attack, Iran has fired dozens of missiles at neighboring Persian Gulf countries. Saudi Arabia said it intercepted Iranian drones targeting one of its refineries.

California Republicans and the California Fuels and Convenience Alliance, a trade group representing fuel marketers, gas station owners and others, blamed Gov. Gavin Newsom’s policies for raising gas prices.

The landmark climate change law calls for California to be neutral by 2045, and Newsom told regulators by 2021 to stop issuing fracking permits and end oil extraction by 2045. He also signed a bill that allows local governments to block the construction of oil and gas wells.

However, last year Newsom changed his stance and signed a bill that would allow up to 2,000 new oil wells per year through 2036 in Kern County despite legal challenges from environmental groups. The region produces about three-quarters of the country’s crude oil.

Borenstein said he didn’t expect the new government’s oil production to do much to lower gas prices, because it’s a little cheaper than gas fetched by marine vessels.

Stanley said the purpose of the legislation is to support the Kern County oil industry, which has been facing pipeline shutdowns without additional supplies to be sent to state refineries.

Nationally, the industry supports more than 535,000 jobs, $166 billion in economic output and $48 billion in local and state taxes, according to last year’s Los Angeles County Economic Development Corp. report.