In an effort to alleviate global crude supply tensions stemming from conflict with Iran, U.S. President Donald Trump is preparing to utilize legal authority from the Cold War era to facilitate the restart of offshore oil production along Southern California's coast. However, this move is considered a long shot. According to a source familiar with the matter who was not authorized to speak publicly, Trump plans to soon invoke powers granted by the Defense Production Act to bypass state laws and clear permitting obstacles for Houston-based Sable Offshore Corp. (SOC.US) to resume large-scale production from a group of offshore platforms in California. Spurred by the news, Sable's stock price jumped as much as 34% before trading was halted. Over the past year, the company's shares have experienced significant volatility and multiple trading halts. Trump's planned order comes as he faces substantial political pressure to address rising fuel prices ahead of the November midterm elections, the outcome of which is expected to heavily depend on American voters' attitudes toward the cost of living. A White House official stated that any policy announcement would come directly from the President himself. Sable Offshore Corp. did not immediately respond to requests for comment.

California is heavily reliant on foreign crude; last year, approximately 61% of the oil used by the state's refineries was imported. About 30% of the state's foreign oil supply transits the Strait of Hormuz, a critical Gulf shipping channel that has been nearly paralyzed by Middle Eastern conflict. This supply disruption has caused prices for oil and its refined products, gasoline and diesel, to surge, erasing the economic success story Trump had previously conveyed to voters. Trump recently attempted to ease public concern over rising prices, threatening "more severe" bombing of Iran if it disrupts crude flows and promising U.S. government-backed reinsurance and naval escorts to encourage tankers to resume transit through the Strait of Hormuz. However, these measures to alleviate oil market pressure have not yet materialized. Although the U.S. International Development Finance Corporation stated it is "rolling out" maritime reinsurance, there is no indication that any tankers have transited the strait with this support or U.S. Navy escort. On Wednesday, the International Energy Agency agreed to conduct the largest emergency oil stockpile release in its history in an attempt to curb soaring prices. It remains unclear whether the action targeting California, which was in motion even before U.S. and Israeli strikes on Iran, can provide substantial relief quickly.

Sable Offshore Corp. has stated that once restarted, its offshore wells could rapidly produce between 45,000 and 55,000 barrels of crude oil per day, with potential output climbing to 60,000 barrels per day by the end of the decade. This volume is minimal compared to total U.S. oil demand, which exceeds 20 million barrels per day, not to mention the estimated daily loss of 15 million barrels from the global market due to the closure of the Strait of Hormuz. Nevertheless, the move aligns with Trump's long-standing policy of prioritizing domestic oil and gas development, including his vision of achieving energy dominance and geopolitical strength through record U.S. production. Sable has been attempting to restart large-scale production from several platforms near the Santa Barbara coast to tap hundreds of millions of barrels of crude oil beneath the seabed. However, its plans have been hindered by opposition from California regulators to restarting the so-called Santa Ynez pipeline system, which is necessary to transport crude to shore and regional refineries. Sable CEO Jim Flores has suggested the possibility of using tankers to ship crude to other markets and has also sought approval from the Trump administration to use pipelines instead. These pipeline systems have been largely idle since a 2015 rupture in a Plains All American pipeline polluted beaches and raised concerns among regulators, environmentalists, and local residents.

Trump's anticipated order was foreshadowed in a Justice Department legal opinion last week, which claimed that invoking the Defense Production Act would override state-level permitting obstacles and parts of federal consent decrees. The law allows the president to authorize a range of actions to bolster U.S. defense capabilities, including directing private companies to expand production of critical industrial materials. Trump paved the way for using the Defense Production Act to increase domestic oil and gas supply on his first day back in the White House, when he declared a national emergency related to U.S. energy supply and infrastructure. The directive stated that the U.S. faces an "extraordinary threat" due to insufficient energy production, transportation, and refining capacity.

Sable's production restart could help supply California, where drivers face some of the highest fuel prices in the nation due to strict environmental rules, special fuel blends, and high taxes. This situation has been exacerbated by the closure of two refineries in the past six months. Interior Secretary Doug Burgum stated last week in an interview that California is the largest consumer of transportation fuels in the U.S. and is "most vulnerable to international price shocks, all stemming from policies implemented in the state. If we invoke the Defense Production Act, it would be for the benefit of the people of California – to allow them to pay lower prices for fuel." The additional production from Sable's facilities would significantly boost California's oil output. The state's onshore oil field production has declined for 40 consecutive years, projected to be just 246,000 barrels per day by the end of 2025, compared to over 1 million barrels per day in the early 1980s.

Trump's move could disrupt California's already tense energy politics. After years of state policies blamed by refiners for increasing operational costs and leading to refinery closures, Governor Gavin Newsom has sought a degree of reconciliation with the oil industry. Newsom enacted legislation last year aimed at boosting California's oil production, a move seen as adjusting his energy production stance ahead of a potential presidential campaign. Complicating Sable's situation further, federal investigators have initiated a review into how the company handles sensitive information. In a filing earlier this year, the company stated it received subpoenas from the U.S. Attorney's Office for the Southern District of New York and the Securities and Exchange Commission after Hunterbrook Media reported that it selectively disclosed information to investors, including professional golfer Phil Mickelson. Mickelson has denied any wrongdoing and called the report "defamatory."