The Iran war triggers the crisis of "energy island" in California: Chevron Corporation (CVX.US) calls on the state government to either abolish taxes or reduce refining capacity to "zero".

Chevron Corporation (CVX.US) warns that California is sliding towards an energy crisis due to the impact of the Iran war. The company stated that unless the state government cancels related taxes and regulations, they may stop refining oil in California. California, the most populous state in the United States, imports about 20% of its refined oil from Asia, making it highly vulnerable to fluctuations in the global commodity market. Currently, with the blockade of the Strait of Hormuz by Iran, shipping from China, South Korea, Singapore, and other countries faces significant risks of slowdown, as the demand from Asian countries is difficult to meet. Chevron Corporation's refining business leader Andy Waltsz said that fuel shortages that may occur in California are his "biggest concern." During an interview on Tuesday, Waltsz said, "Our refineries in Asia have had to reduce the processing of crude oil, resulting in reduced output. What will happen if San Francisco and Los Angeles don't have the necessary aviation fuel or gasoline? California is not connected to the major fuel production centers in the United States, such as Texas and Louisiana, essentially forming an "energy island." In recent years, regulations aimed at combating climate change and limiting profits in the oil industry have raised operating costs, leading to the closure of several refineries and exacerbating supply vulnerabilities. As a result of the impact of the Iran war, consumers in California are more exposed to the risk of soaring energy prices than in most other regions of the United States. Currently, gasoline prices in California are close to $6 per gallon, compared to the national average of about $4. This poses an increasingly severe political challenge for Gavin Newsom, a Democratic governor expected to compete in the 2028 presidential election. During the CERAWeek conference hosted by S&P Global, Inc. in Houston, Waltsz stated, "California's decision to rely on imports is a dangerous game." He called on California officials to declare an "energy emergency," reform climate and tax regulations, and promote domestic oil production. He warned that without such actions, Chevron Corporation may cease its refining operations in California within ten years. A spokesperson for Newsom's office, Anthony Martinez, responded in an email, accusing oil companies of profiteering from the Iran war and waging a coordinated attack on California. He said, "If they genuinely care about protecting consumers, they should focus their efforts on the responsible party - Donald Trump. Trump's war is costing American families at the gas pump, with no end in sight." The Trump administration has used emergency wartime powers to authorize Sable Offshore Corp., based in Houston, to restart offshore oil production off the coast of California. Trump has also temporarily waived the century-old Jones Act to lower the costs and difficulties of transporting gasoline, diesel, and other goods between U.S. ports. Waltsz believes that California's problems are largely self-inflicted. The state has the strictest fuel standards and carbon trading program in the country, with critics arguing that these policies force consumers to bear the highest energy prices in the U.S. California plans to reduce carbon emissions by 85% by 2045, heavily relying on the near-total elimination of gasoline cars and substantial reductions in heavy industry, including refining. Despite this, California remains the second largest gasoline consumption market in the U.S. and the largest market for aviation fuel, with no practical low-carbon alternatives currently available. Waltsz said, "California's intent to transfer carbon emissions to other countries has actually shifted supply security away, while also losing jobs and having no impact on carbon reduction." As the war disrupts regional supplies that West Coast refineries typically rely on, Chevron Corporation is taking unconventional measures to transport oil from the Gulf of Mexico to California through the Panama Canal. The company has oil tankers idle on both sides of the Strait of Hormuz. With reduced supply in the Gulf region, China has implemented a fuel export ban. If the Strait of Hormuz remains blocked for an extended period, other Asian countries may follow suit. Chevron Corporation's scenario planning initially assumed the strait would be blocked until the end of March, but Waltsz said, "Now our scenario assumptions are worse, the duration will be longer, and we are trying to anticipate the future." California has over 30 military bases, including the largest Travis Air Force base in the U.S., which Chevron Corporation supplies with fuel from its refinery in Richmond. Waltsz said, "I believe the U.S. government should be concerned about this." If the new emission regulations proposed by the California Air Resources Board are implemented, they will further increase the operating costs of the remaining refineries in the state. Chevron Corporation estimates that additional expenses could reach up to $500 million within five years. Waltsz warned, "They need to cancel taxes on refineries, or there will be no refineries available in ten years. If the status quo is maintained, Chevron Corporation will definitely leave within ten years, we cannot sustain it."