California Gas Prices Surge Past $6 as Iran War Disrupts Oil Supply

Gas prices in California have surpassed $6 per gallon, the highest in two years, as Americans celebrate the 100th anniversary of historic Route 66. The primary cause is the U.S. war with Iran, which has brought the worst-ever disruption to global oil supplies, driving up prices worldwide and posing particular hardships for drivers in California, the most populous U.S. state with the most cars on the road.

Details

California has some of the highest gas prices in the country due to strict emissions standards, high taxes, and reliance on imported petroleum. Separately, Exxon Mobil (ticker: XOM) said Friday its quarterly production was down nearly 8% from the prior quarter, largely due to ongoing disruptions to the shuttered Strait of Hormuz. That dropped Exxon's quarterly profit to its lowest level in 5 years.

Context

About 20% of Exxon's oil and gas production is located in the Middle East, giving it one of the highest exposure rates among major oil companies. By contrast, Chevron, the No. 2 U.S. oil producer, said on Friday that less than 5% of its production comes from the Middle East. Even though it is less exposed to the war, Chevron reported its lowest profit in five years, partly linked to the company's financial hedges. Shares of both Exxon and Chevron were lower in Friday trading.

What This Means for Investors

These developments highlight the geopolitical risks facing major oil companies, especially those with significant Middle East exposure like Exxon Mobil. While others may benefit from higher prices, the current disruptions are negatively impacting production and profits. Investors should monitor the conflict's evolution and its effect on global oil prices and supply stability.