The super unleaded at my Costco in Orange County hit $6.40 this week. I filled the tank, watched the total climb past $90, and checked my phone. My posts on EV adoption and hybrid strategy were generating the most LinkedIn engagement I have seen all year.
I am not sure what to do with that.
The people reacting are mostly automotive professionals, fleet managers, and B2B transportation decision-makers. The conversation they are having — drivetrain strategy, charging infrastructure, hybrid adoption curves — is a good one. Informed people, real data, genuine disagreement. I have contributed to about forty versions of it over the past year.
The Strait of Hormuz does not know it is happening.
Here is what is actually going on. On February 28, 2026, the United States and Israel launched Operation Epic Fury against Iran. Within hours, Iran closed the strait. As of today, 69 consecutive days of effective commercial shutdown. The IEA calls it the largest supply disruption in the history of the global oil market. Brent crude has traded above $100 per barrel for nearly two weeks. Physical crude traded at $144 in April while paper futures settled at $90. Jeff Currie at the Carlyle Group went on Bloomberg this week and said US oil storage tanks could hit operational failure thresholds around July 4, and that he has "never seen anything like it before."
The last tanker carrying Persian Gulf crude to California docked at Long Beach on May 3. There is no next one currently scheduled.
California is structurally exposed in a way that most of the country is not. The state imports roughly 60 percent of its crude. About 20 percent of that came from the Middle East. There is no pipeline alternative. Energy analysts call California an energy island, disconnected from domestic supply networks and entirely dependent on seaborne imports. The statewide average is now $6.13 per gallon. The $6.40 I paid at Costco is not a Costco problem. It is a structural problem that was always there, waiting for a catalyst.
The question worth asking is how California got here.
California built its own trap
At its 1984 peak, California produced approximately 1.2 million barrels of oil per day. It was the largest producing state in the country. By 2024, production had fallen 75 percent — down to 119 million barrels annually. The oil did not run out. The state made a series of deliberate choices to leave it in the ground.
CalGEM, the state agency responsible for drilling permits, effectively froze new permitting for roughly five years. A 2022 law banned oil and gas operations within 3,200 feet of homes, schools, and hospitals — a setback rule that placed large portions of California's existing producing regions off-limits for new development. Newsom committed to ending new fracking permits by 2024 and has stated a goal of phasing out all oil extraction in the state by 2045. The California Air Resources Board has a plan to bring oil and gas consumption down to less than one-tenth of current demand by that same date.
The refineries followed. California had more than 23 operating refineries in 2000. As of 2026, 12 remain. Phillips 66 shut its Los Angeles facility at the end of 2025. Valero announced the closure of its Benicia refinery, citing the regulatory environment as the reason. The state is heading toward 11 operating facilities.
What replaced California's domestic production was foreign crude. Iraq now supplies 22 percent of California's refinery inputs. Ecuador 17 percent. Saudi Arabia 16 percent. Colombia 7 percent. Two-thirds of the crude refined in California in 2024 came from abroad. By early 2026, California was importing gasoline refined from Russian crude through indirect supply routes.
Think about what that means. The state banned domestic oil production on environmental grounds, then replaced it with crude from Iraq, Saudi Arabia, Ecuador, and Russia — countries operating under no comparable environmental standards. California did not reduce oil consumption. It outsourced it, along with the emissions, the labor conditions, and the geopolitical risk that comes with depending on Persian Gulf supply routes.
By 2025, Newsom had quietly begun warming to the oil industry. After years of tightening the regulatory screws, the governor found himself at the table with the same producers he had spent years squeezing, trying to negotiate his way out of refinery closures he had helped cause. Too late for the Phillips 66 plant. Too late for Benicia. Too late to rebuild a permitting pipeline frozen for five years.
When the last tanker from the Persian Gulf unloaded at Long Beach on May 3, California had no domestic alternative to turn to. It had spent the previous decade making sure of that.
The auto market: the mandate nobody voted for
The people who bought EVs in 2023 or 2024 are not sweating this. A driver with a 50-mile daily commute and a home charger insulated themselves from whatever happens at the pump for the foreseeable future. Not because of a tax credit. Not because of a government mandate. Because $6 gas is the most persuasive argument for electrification anyone has ever made, and it arrived whether buyers were ready for it or not.
I wrote about the Porsche Macan reversal recently. The gas Macan outsold the Macan Electric in Q1 2026 while being discontinued. Buyers chose gas as a preference, not a budget call. Those same buyers are now paying $6 and up to maintain that preference. Porsche is still right to build the 2028 gas and hybrid Macan. The long-run buyer demand is real. But the short-run cost of being a gas loyalist in California just became impossible to ignore.
That is the irony the drivetrain debate keeps missing. The market pressure that no incentive program ever quite achieved is now arriving through a war in the Persian Gulf. If you are a luxury buyer shopping a $75,000 to $90,000 compact SUV and you have home charging, the electric version of that vehicle looks like a different product than it did in January. Not because the technology changed. Because the math did.
The complication is that it is not a clean EV win. Supply chains for EV components run through the same disrupted global shipping network. The crisis is putting pressure on the whole system, not just on gasoline-powered vehicles. What the auto market is experiencing right now is not a controlled handoff to electrification. It is a supply shock that is repricing every assumption simultaneously.
Trucking: where the margin math actually breaks
Personal vehicle decisions involve preference and budget. Trucking decisions involve margin. And diesel margin math in a $6-plus environment is forcing decisions that preference cannot override.
Diesel in Michigan hit $6.00 this week. In California, projections range higher depending on how long the crisis extends. Every LTL carrier, every last-mile fleet, every refrigerated trailer moving produce from the Central Valley to a distribution center in Riverside is running the same calculation. Fuel surcharges are written into most freight contracts, but they lag. They have caps. They were built for a different price environment.
Spirit Airlines is the case study. Spirit's restructuring plan modeled jet fuel at $2.24 per gallon. It hit $4.51 by May 2. The carrier absorbed nearly $100 million in incremental fuel costs between March 1 and April 30, ran out of options, and shut down. Seventeen thousand jobs. The airline did not fail because it built a bad product. It failed because its cost model had no room for a 100 percent fuel price increase in ten weeks.
LTL carriers are not airlines. The asset structures are different and the failure modes are slower. But the pressure is real, and it falls unevenly. Large carriers with modern equipment, hedged fuel contracts, and diversified routes absorb more. Small regional carriers and owner-operators on variable-rate fuel exposure absorb less. Route rationalization has already started in the highest-cost regions. The last-mile network that Amazon, FedEx, UPS, and the regional carriers spent a decade building assumes a fuel cost structure that no longer exists.
The operators who moved fastest on electric delivery vehicle pilots are running a different model right now than the ones who did not. The procurement timelines that looked slow and bureaucratic six months ago look prescient in May.
Busing: the fleet that saw this coming
Transit agencies and private motorcoach operators have been watching the diesel cost curve longer than most of the automotive industry. The electric bus transition has been underway in serious form since 2021, driven partly by federal policy, partly by available incentives, and partly by the basic operating math of a 40-foot transit bus running 12 hours a day on diesel.
The agencies that moved aggressively on fleet electrification are running a materially different financial model right now than the agencies that did not. The capital cost argument against electric buses always required stable or declining fuel costs to hold up. That assumption just inverted. Agencies with significant diesel exposure are facing budget pressure that no operating efficiency can absorb cleanly.
Private motorcoach operators face a harder version of the same problem. The federal funding mechanisms available to public transit agencies are not available to private carriers. A charter bus company running diesel coaches through the summer travel season is operating against fuel costs that were not in any budget prepared before February 28. The carriers that converted early have pricing flexibility their competitors do not.
The broader fleet tech conversation — telematics, route optimization, predictive maintenance — has always had a fuel efficiency component as part of the ROI calculation. That component just became the most important one in the room.
What actually comes next
Nobody knows exactly how this resolves. Operation Epic Fury is officially over. Negotiations are underway. But Currie was clear on Bloomberg: even if the strait fully reopened today, it would take three-plus months before supply began flowing again, and considerably longer before inventories recovered. The physical pipeline from Persian Gulf to US pump is a fixed timeline that diplomacy cannot compress.
The transportation industry is going to operate at elevated fuel costs for at least the rest of 2026. California will operate at higher elevated costs than most of the country. The sectors with the thinnest margins and the least flexibility will feel it first and in some cases will not survive it. The sectors that made the capital investments in electrification over the past three years are now seeing those investments reframed — not as environmental commitments or regulatory compliance, but as operational hedges against exactly the kind of supply shock that just arrived.
The LinkedIn debate about drivetrain strategy is the right conversation. It is just being conducted in a very different context than it was at the start of this year.
I know that every time I fill up at Costco now.
Steven Mitchell covers the gap between what the transportation industry plans and what actually happens. He has 177 bylines in CBT News and writes at creativeguysteve.com.
