There’s a health scare making headlines right now, and understandably so. Hantavirus is frightening, and the coverage it’s receiving reflects genuine public concern. But there’s another story developing quietly in the background that deserves just as much of your attention — and its impact on your daily life and your business could be far more sweeping.
California has four to six weeks of gasoline and diesel supply left.
Let that sink in as you drive home from work today.
The last tanker
The last supertanker carrying Middle Eastern crude oil docked in Long Beach last week, delivering what may be the final such shipment for the foreseeable future. Iran closed the Strait of Hormuz in February, cutting off the source of a significant portion of the oil California refineries depend on.
The state already depends more on Middle Eastern crude than any other state in the country, and now that supply line is gone. Refiners are scrambling to find alternative sources, but in a global shortage, as one industry expert put it, every country looks inward first — and California is left bidding for whatever remains.
Gas prices in California are already averaging $6.15 a gallon this week. In Fresno, the average hit $6.07, up 26 cents from a month ago. The least expensive station in town was around $5.35. The most expensive was $7.15. And analysts say it is going to get worse.
Years in the making
The war in Iran has brought the crisis to the forefront, but it’s been years in the making in the Golden State, where two major oil refineries have closed in the last year, taking about 17% of oil refining capacity with it. Decades of policy and regulation have taken the oil industry to the brink in California. Alternative energy vehicles remain expensive and charging infrastructure lacking.
Higher fuel costs don’t stay at the gas station. They move through the entire economy. Truckers pay more to move goods. Farmers pay more to run equipment and get crops to market. Delivery costs go up. Manufacturers pay more. And eventually, all of it lands on the price tags your customers see at checkout.
Higher prices, lost output
Our own Business Journal poll this week found that 48% of Central Valley business owners said their first response to a serious fuel shortage would be to raise prices. Another 21% said they would cut back on deliveries or operations. The math here is not complicated — and it is not pretty.
But the scenario that should really give you pause is this: what if the shortage deepens and supply doesn’t recover fast enough? We may be looking at something this region and this country hasn’t seen in roughly 50 years — gas lines.
’70s here we come?
If you are old enough to remember the 1970s oil crisis, you might know what that looked like. Drivers waiting in lines stretching around the block. Odd-even rationing based on your license plate number. Stations running dry by midday. The anxiety of not knowing whether you would be able to fill your tank to get to work.
For most of us, that era exists only in history books or old photographs. It may be time to pull those books off the shelf and prepare to feel some pain.
Find someone in your life who lived through it. Ask them what it was like and what they wish they had done differently. Ask them how it changed the way they thought about fuel, about supply chains and self-reliance. Their answers may be more useful to you right now than anything an economist has to say.
Plan accordingly
California officials and refinery operators are working to find alternative crude sources and reroute supply chains. Gasoline imports showed some improvement in the first week of May, which is encouraging. But the experts are skeptical that even a reopening of the Strait of Hormuz would bring immediate relief, noting that damage to regional facilities from Iranian missiles could keep prices elevated through the end of the year.
Four to six weeks. That is the window. Plan accordingly.