Impact of CrowdStrike IT Outage on California’s Fuel Market

By Shariq Khan
NEW YORK (Reuters) – Last month’s CrowdStrike (NASDAQ:CRWD) IT outage, which grounded numerous flights, led to additional challenges for California’s fuel market. U.S. traders have been forced to store jet fuel meant for the state on waterborne tankers, according to storage broker The Tank Tiger.

The outage intensified existing restrictions on petroleum storage in California, where efforts to reduce fossil fuel dependence have complicated the establishment of new oil and gas facilities.

“When it comes to petroleum products storage in California, there has been no room at the inn for several years,” said Ernie Barsamian, founder of The Tank Tiger.

California’s strategic position on the U.S. West Coast establishes it as a key petroleum trading hub, sustaining high demand. This status exposes the region to significant fuel price volatility during disruptions like the IT outage or refinery issues.

“Despite prevailing demand, permitting for new storage tanks in California is a cumbersome process,” Barsamian noted. Consequently, storage costs in the state are approximately double those in trading hubs like New York Harbor or Houston.

California’s Certified Unified Program Agency, which oversees the state’s Aboveground Petroleum Storage Act Program, did not respond to a comment request.

When flights were grounded in July, the resulting surplus of jet fuel could not be accommodated in California, necessitating repositioning to waterborne locations near Houston and New Orleans.

Traders rely on ships for storage only as a last resort when land storage options are full or unavailable. Keeping vessels in use longer can delay their journeys, tightening the market further and raising costs.

Jet fuel inventories in onshore tanks across the U.S. West Coast surged to over 12 million barrels in the week ending July 26, reaching a record high. The CrowdStrike outage commenced on July 19.

Strong demand has spurred significant increases in West Coast imports this year, with analysts at ship-tracking service Kpler indicating that imports from both domestic and international sources averaged around 135,000 barrels per day—25,000 bpd higher than last year.

West Coast jet fuel stocks were approximately 11.8 million barrels last week, nearly 28% above last year’s levels.