California shipping gasoline through the Bahamas to avoid fuel shortage

Refinery closures and maritime law loopholes force expensive detours for West Coast fuel supply

California faces a growing gasoline shortage forcing refiners into an increasingly costly workaround: shipping fuel through the Bahamas instead of using direct domestic routes. US supplies are leaving the country, traveling thousands of miles through the Caribbean, and returning to California ports—a circuitous journey that adds significant costs to already expensive West Coast gasoline prices.

The unusual supply pattern emerged as California’s oil refining capacity collapsed. After Phillips 66 shuttered its Los Angeles refinery in October 2025, California imported gasoline at levels unseen since at least 2016. With Valero Energy preparing to close a Northern California refinery this spring, the state faces deepening dependency on imports to meet fuel demand.

More than 40 percent of California’s November gasoline imports arrived through the Bahamas route, representing unprecedented reliance on the Caribbean transshipment point. Last year, California sourced more gasoline from the Bahamas than it had in the previous nine years combined.

Why the Bahamas makes economic sense despite the distance

The bizarre shipping pattern emerges from an intersection of strict environmental regulations, disappearing refineries, and a 106-year-old maritime law creating unexpected economic incentives. The Jones Act requires any goods shipped between US ports to travel on US-built, owned, and operated vessels. These Jones Act-compliant tankers are extremely scarce and expensive to charter.

Approximately 55 Jones Act-compliant oil tankers exist globally, compared with more than 7,000 conventional oil tankers worldwide. The shortage makes Jones Act shipping dramatically expensive. Foreign-flagged vessels cost substantially less than US-flagged alternatives—a difference that previously exceeded $4 per barrel before recent changes shifted economics.

By routing fuel through the Bahamas, refiners avoid the Jones Act requirement entirely. Gasoline loaded in the US Gulf and transshipped through the Bahamas technically becomes foreign cargo, allowing cheaper foreign-flagged vessels to transport it back to California. The cost savings from avoiding expensive Jones Act shipping offset the inefficiency of taking the long route.

Environmental regulations accelerated the crisis

California maintains among the strictest environmental regulations in the US, making energy company operations expensive and complex. The regulatory environment discouraged refinery investment and accelerated closures as operators decided domestic production became economically unviable. The state’s specialized gasoline formulations require particular refinery configurations, limiting which facilities can supply California markets.

Recent refinery closures have prompted regulatory reconsideration. State officials and regulators acknowledge that losing refining capacity threatens fuel availability and affordability. Estimates suggest the closures could raise consumer gasoline prices between 5 and 15 cents per gallon—substantial increases for a state already experiencing elevated fuel costs.

The Panama Canal route replaces missing pipelines

California has no direct fuel pipelines connecting the state to the US Gulf Coast, the nation’s oil production powerhouse. This infrastructure gap forces fuel imports arriving by ship. The Bahamas route became attractive as refinery capacity declined, allowing refiners to capitalize on California’s fuel shortage by capturing premium margins on specialized gasoline blends.

Foreign refineries increasingly dominate California imports. Japan, India, and South Korea collectively supplied more gasoline to California than the Bahamas, though the Caribbean route emerged as the third-leading non-US supplier. Asian refineries already produce California-required gasoline specifications, making direct shipments economically practical without Panama Canal transit fees.

Economics shifting as freight costs rise

Recent sanctions relief regarding Venezuela triggered increased regional freight prices. Foreign-flagged vessels that previously cost nearly $4 per barrel cheaper than Jones Act alternatives now offer barely $1 savings. As freight costs continue rising, the Bahamas route economics deteriorate rapidly.

If foreign vessel premiums continue narrowing, US refiners may abandon Bahamian transshipment entirely. South Korean and Indian refineries could become more competitive alternatives despite longer shipping distances. The trend suggests the Bahamian route represents temporary exploitation of specific economic conditions rather than permanent supply solution.

A troubling West Coast trend emerging

The Bahamian trade pattern mirrors a longer-established East Coast workaround where US Gulf gasoline ships through the Caribbean to avoid Jones Act restrictions. That trend became standard East Coast practice over years. West Coast adoption of the same strategy reflects deepening fuel supply challenges as refinery retirements continue.

Industry analysts expect the Bahamian route to persist despite its economic inefficiency. The combination of shrinking domestic refining capacity, absent pipeline infrastructure, and Jones Act constraints provides no obvious alternative. California will likely depend on expensive imported fuel delivered through increasingly creative routing until refining capacity stabilizes or pipeline infrastructure development occurs.

Recent examples demonstrate the route’s established operation. A Singapore-flagged tanker delivered nearly 300,000 barrels of gasoline blendstock to Los Angeles in early January after loading in the Bahamas. Another vessel completed similar deliveries to San Francisco. Phillips 66 recently leased Bahamian storage facilities, signaling commitment to the transshipment model.