The Bahamas BarrelWhy Is California Importing Fuel from a Country That Produces Almost No Oil?

SOMETIMES A BARREL HAS TO TRAVEL THE WORLD TO GET BACK HOME

It started with a question to President Trump about California: Why are fuel costs so high while the state is simultaneously losing refinery capacity?

Then came another exchange, this time in California. During questioning about the state's increasingly precarious fuel situation, an energy official explained that California was becoming more dependent upon imported petroleum products. Among the places mentioned were South Korea and the Bahamas.

South Korea made immediate sense. It possesses one of the world's largest and most sophisticated refining industries and has long participated in the international petroleum-products trade. The Bahamas was different. Why would California, sitting inside one of the world's largest oil-producing countries, import petroleum products from a small Caribbean nation that produces essentially no crude oil?

If that sounds like an odd question, it is the same one that started this investigation.

And there is a story here.

The answer begins at Freeport, home to one of the largest petroleum storage and blending complexes in the Caribbean. From there, however, the story quickly becomes more complicated than tanks and tankers. Following the barrels leads into American petroleum exports, offshore storage and blending, changes in ownership, international commodity trading, customs classifications, California's shrinking refinery system and, eventually, petroleum products attributed to the Bahamas arriving back in the United States.

None of this, by itself, establishes wrongdoing. Much of it may represent perfectly ordinary international petroleum trading. But the scale and timing of some of the movements are sufficiently unusual that they deserve considerably more examination.

In 2025, U.S. Gulf Coast exports of unfinished oils to the Bahamas increased from roughly 576,000 barrels the previous year to 18.844 million barrels. At almost the same time, West Coast imports of gasoline blending components attributed to the Bahamas increased from approximately 498,000 barrels to 7.969 million barrels.[1][2]

Those aren't necessarily the same barrels, and the two figures represent different petroleum categories. But we also know that American petroleum really does travel to Freeport. Petroleum from multiple origins can be stored, aggregated and blended there before petroleum products subsequently leave the Bahamas for markets that include the United States.

The interesting question therefore is no longer simply why California imports petroleum from a country that produces virtually no oil. The more useful question is what happens to a barrel—physically, legally and financially—between the moment it leaves its original source, enters the Bahamas petroleum complex and subsequently appears as a petroleum product imported into the United States.

Who owns the petroleum when it arrives? Does ownership change while it is in storage? What is blended into it? Does that processing change its customs classification or commercial identity? What was the material worth when it entered Freeport and what is the resulting product worth when it leaves? Who sells it, who imports it, are any of those companies related, and where is the resulting trading margin ultimately recognized?

Those questions become particularly important when the destination is California, a state simultaneously losing domestic refining capacity while becoming increasingly dependent upon imported petroleum products.

If you have wondered why California would import petroleum from the Bahamas, here is the story.

The Bahamas Doesn't Produce the Oil

The first thing to understand is that describing petroleum as coming "from the Bahamas" can create the wrong mental picture. The Bahamas is not Saudi Arabia, Texas or even a minor petroleum producer feeding its own crude into the international market. Its importance comes instead from geography and infrastructure.

Freeport sits immediately adjacent to some of the world's busiest Atlantic and Caribbean petroleum routes and within a relatively short voyage of the United States. Over decades, that geographic advantage helped create a major petroleum-storage, trading and transshipment industry.

The Buckeye Bahamas Hub, historically known as BORCO, is the centerpiece of that system. It has roughly 26 million barrels of storage capacity and infrastructure capable of handling crude oil, fuel oil and refined petroleum products. Buckeye describes the facility as providing storage, throughput, blending and build/break-bulk services.[3]

Those capabilities make an important difference. A large tanker can deliver petroleum that is subsequently divided among smaller cargoes, while smaller parcels can be accumulated into larger shipments. Different petroleum components can be stored separately and later combined into blends meeting the specifications of a particular destination market.

Freeport therefore isn't simply a parking lot for petroleum. It is a location where the physical material can be stored, blended, traded and redistributed, and where the commercial identity of a petroleum product can consequently become considerably more complicated than the geological origin of the hydrocarbons contained within it.

Following the Barrel Through Freeport

Imagine a gasoline component produced on the U.S. Gulf Coast and exported by tanker to Freeport. Once it reaches the terminal, the product might remain in storage while still belonging to its original owner, or it might be sold to another trader. It might remain physically segregated or be combined with compatible components arriving from another refinery or another country. Eventually, it could become one component in a larger blend designed to meet the requirements of a particular destination market.

The resulting product might then be sold again and loaded aboard an entirely different tanker.

Consequently, the vessel that brought the original petroleum into Freeport does not necessarily have to be the vessel carrying the eventual product to California, and the company owning the petroleum when it entered the Bahamas does not necessarily have to be the company owning it when it leaves.

This distinction between physical movement and economic ownership isn't simply theoretical. The International Monetary Fund encountered essentially the same problem while examining Bahamian external-sector statistics. Its 2025 technical work identified significant discrepancies involving petroleum and explained that petroleum can physically enter storage without necessarily changing ownership, whereas other petroleum transactions may involve a transfer of ownership. Petroleum represented roughly 40 percent of the identified discrepancy involving exports and approximately half of the discrepancy involving imports in the statistics examined, leading the IMF to recommend further reconciliation of the petroleum data.[4]

That finding does not demonstrate that petroleum is being illicitly concealed. It demonstrates something more fundamental to this investigation: the physical movement of a barrel and the economic ownership of that barrel are not necessarily the same statistical event.

Once that distinction is understood, the phrase "petroleum imported from the Bahamas" becomes considerably less informative than it initially appears.

American Petroleum Really Does Go to the Bahamas

The story becomes more interesting when we look at the direction of trade. The United States isn't simply receiving petroleum from Freeport. It is also supplying petroleum to the Freeport complex.

Industry reporting using tanker-tracking data has documented substantial movements of U.S. Gulf Coast gasoline into the Bahamas for blending and redistribution. Argus reported that Gulf Coast gasoline constituted a major portion of the petroleum entering Freeport during 2025 and that in January 2026 alone roughly 72,000 barrels per day arrived there from the U.S. Gulf Coast.[5]

The facility also sends petroleum products into markets that include the United States.

We therefore know that a commercial pathway exists in which American petroleum can leave the United States, enter the Bahamas storage and blending system and subsequently be followed by petroleum products moving from the Bahamas into American markets.

There is nothing inherently illegal or even particularly unusual about that process. International commodity markets routinely move intermediate products between countries for storage, blending, processing and arbitrage. A particular location may possess cheaper storage, better tanker access or blending capabilities that make the additional voyage economically worthwhile.

But this does mean that describing a cargo simply as an "import from the Bahamas" tells us surprisingly little about where its components were originally produced.

The petroleum's physical origin, its owner, the country from which the final cargo was exported, its customs classification and the identity of the seller can all describe different aspects of the same transaction.

Then Something Changed

The West Coast numbers are where this moves from an interesting feature of international petroleum trading into something worth investigating more closely.

According to the U.S. Energy Information Administration, West Coast petroleum-product imports attributed to the Bahamas were approximately 737,000 barrels in 2022, 963,000 barrels in 2023 and 1.650 million barrels in 2024. In 2025, they jumped to 8.288 million barrels.[2]

Even more striking is what made up that increase. Approximately 7.969 million barrels were gasoline blending components. The comparable number in 2024 had been only about 498,000 barrels, meaning that West Coast imports of Bahamas-attributed gasoline blending components increased roughly sixteenfold in a single year.

At the same time, another remarkable petroleum movement was occurring in the opposite direction. U.S. Gulf Coast exports of unfinished oils to the Bahamas rose from approximately 576,000 barrels in 2024 to 18.844 million barrels in 2025.[1]

These numbers must be treated carefully. Unfinished oils and gasoline blending components are different EIA categories, and the aggregate statistics do not allow us to claim that the petroleum leaving the Gulf Coast subsequently became the petroleum entering the West Coast.

Nevertheless, when one enormous petroleum stream suddenly begins flowing from the United States into a major offshore blending and storage hub while another petroleum stream from that same hub simultaneously surges into the U.S. West Coast, asking whether the two movements intersect somewhere inside the Freeport petroleum complex is not speculation for speculation's sake. It is an obvious provenance question.

California Is Losing Refining Capacity

The timing becomes still more important when placed alongside California's changing refinery system.

Phillips 66 announced that it would cease operations at its Los Angeles-area refinery, while Valero announced plans to end refining operations at Benicia. Together, those developments represent a substantial reduction in California's domestic refining capacity.[6][7]

California's underlying problem is not simply that petroleum demand is declining. The California Energy Commission has acknowledged the more difficult transition problem: refining capacity can decline faster than consumption. When that happens, the difference between what California consumes and what its remaining refineries can produce has to come from somewhere.

California cannot simply compensate by opening a gasoline pipeline from the enormous refining system along the Gulf Coast. Unlike much of the continental United States, California is relatively isolated from the national petroleum-product pipeline network. Replacement fuel therefore increasingly has to arrive by sea.

That creates an important distinction between reducing petroleum consumption and reducing petroleum production. California can lose refinery capacity faster than motorists reduce their fuel consumption, but doing so does not eliminate the barrels. It changes where those barrels are produced and how they reach California.

A relatively direct domestic supply chain in which crude oil enters a California refinery and finished gasoline moves into California distribution can therefore be replaced by a much longer international chain involving crude or intermediate petroleum, refining somewhere else, international commodity traders, marine transportation, offshore storage or blending, another marine voyage and finally a California receiving terminal.

The latter arrangement may ultimately prove economically efficient. It can also provide California with access to multiple suppliers rather than leaving the state dependent upon a small number of enormous refineries.

But the additional steps are not economically invisible.

Who Gets Paid Along the Way?

Storage, blending, tanker transportation, marine insurance and inventory financing all cost money. Commodity traders also expect compensation for providing liquidity, assuming price risk and matching sellers with buyers. None of these activities should automatically be characterized as waste. They can provide genuine economic value and may make an international supply chain cheaper than maintaining an uneconomic refinery.

The relevant question is therefore not whether someone makes money along the way. Of course they do.

The more interesting question is where the value of the petroleum increases, who captures that increase and whether the longer supply chain ultimately produces a better or worse economic outcome for California consumers.

Suppose, purely as an illustration, that an American petroleum component leaves a refinery worth $100. It is purchased by a trader, transported to Freeport, placed into storage, blended with other components and financed while sitting in inventory. Another company then purchases the resulting product and arranges marine transportation to California. By the time that petroleum reaches California, its value might be considerably greater than the original $100.

There may be perfectly legitimate reasons for every dollar of that increase. But if we want to understand the economics of replacing California refining with imported petroleum products, we need to know who received those dollars and why.

That requires following the money as carefully as we follow the tanker.

The Ownership and Tax Question

For every significant petroleum stream passing through Freeport, the ideal investigation would reconstruct its physical origin, ownership upon arrival, customs classification, storage or blending activity, subsequent changes in title, ownership upon departure, declared origin and value when entering the United States, identity of the American importer, relationships between the companies involved and, finally, the jurisdiction in which the resulting trading profit was recognized.

That last question becomes particularly important if affiliated companies appear at multiple points in the chain.

Consider a hypothetical petroleum company that sells a product from an American subsidiary to a foreign affiliate. That affiliate stores or blends the product before selling it through another trading subsidiary, which ultimately supplies an affiliated American importer. There is nothing inherently improper about that arrangement. Multinational corporations conduct transactions between subsidiaries every day.

Tax authorities nevertheless care greatly about the prices attached to those transactions because the prices at which related companies trade with one another can influence where corporate profits appear.

That is the purpose of transfer-pricing rules.

California's Franchise Tax Board explicitly recognizes the possibility of international tax sheltering through transactions between California businesses and excluded foreign affiliates and instructs auditors to determine whether intercompany transactions satisfy arm's-length pricing requirements.[8] California also permits qualifying corporations to elect water's-edge reporting, which generally limits which foreign affiliates are included in the state's combined corporate report.[9]

None of that demonstrates that petroleum companies supplying California through the Bahamas are avoiding California taxes. It simply identifies a legitimate investigative question.

If an American company sells petroleum at market price to an unrelated international trader, which independently blends the material and subsequently sells a substantially transformed product to an unrelated California importer, the transaction may represent nothing more than ordinary international commerce.

If, however, the same corporate family repeatedly appears on both sides of the Freeport transaction, then determining where the trading margin was recognized and whether the transfer prices reflect arm's-length values becomes much more important.

Hypotheticals

The unusual growth of petroleum traffic between the United States, the Bahamas and the U.S. West Coast does not by itself establish misconduct. Freeport is a major petroleum storage, blending and transshipment center, and there may be straightforward commercial explanations for these movements. Nevertheless, the scale and timing of the changes make several competing explanations worth testing against the ownership, pricing and physical movement of the barrels.

1. Efficiency Hypothesis: Freeport is simply an efficient international blending hub. Components from the United States and other countries are aggregated there because storage, blending, marine access and scale allow suppliers to produce California-specification fuel more economically than available alternatives.

2. Regulatory/Arbitrage Hypothesis: California's regulatory environment and declining domestic refining capacity have made offshore processing and blending economically preferable. The result may be an unintended migration of part of California's petroleum value chain—along with associated employment, infrastructure and economic activity—to foreign facilities.

3. Tax/Profit-Allocation Hypothesis: The international structure may provide opportunities for companies to recognize trading, blending or intermediary margins outside California or the United States. Such arrangements can constitute entirely lawful tax planning when transactions and transfer prices comply with applicable rules. The question is whether ownership changes, related-party transactions and pricing show that significant portions of the petroleum margin are being accumulated offshore before the product re-enters the United States.

4. Price-Support Hypothesis: Exporting American petroleum components into the international market and subsequently supplying California through that market could reduce immediately available domestic supply while exposing California consumers to international product prices, transportation costs and trading margins. The stronger possibility—that companies deliberately structure these movements to maintain higher domestic prices—would require substantially more evidence, including ownership relationships, pricing behavior or evidence of intentional withholding. It remains a hypothesis to be tested, not a conclusion.

These explanations need not be mutually exclusive. Freeport could provide genuine logistical efficiencies while simultaneously offering regulatory or tax advantages, and the resulting international supply chain could influence the price ultimately paid by California consumers. The purpose of examining these possibilities is not to select the most provocative explanation in advance, but to determine which combination best fits the barrels, the ownership records and the money.

What About the "World Market"?

Petroleum companies frequently point out, correctly, that crude oil and refined petroleum products participate in international markets. But describing petroleum as possessing a single "world price" can oversimplify what is actually a collection of interconnected markets.

Crude oils of different qualities command different prices. Unfinished oils have their own markets, as do gasoline blending components and finished gasoline. California-specification gasoline represents an especially constrained product market because relatively few refineries are configured to produce it. Transportation costs, inventories, refinery outages, environmental specifications and available shipping capacity can therefore matter almost as much as the underlying price of crude.

Sending American petroleum into the international market and subsequently supplying California with petroleum products through that international system can consequently expose California more directly to international product pricing.

That does not demonstrate that anyone deliberately designed the arrangement to keep prices elevated. But neither should invoking the "world market" end the discussion.

If petroleum originally produced in the United States travels offshore and subsequently contributes to a petroleum product imported back into the United States, it should be possible to determine what economically useful transformation occurred during that journey and what that transformation added to the delivered cost.

If Freeport can produce California-compliant blending components more efficiently than California refineries can produce them domestically, then the international system may actually reduce the price California consumers would otherwise pay after refinery closures.

If, on the other hand, a significant portion of the apparent economic advantage comes from regulatory differences, offshore profit allocation or additional trading margins rather than productive efficiency, that tells us something very different about the economics of California's energy transition.

The numbers should allow those possibilities to be tested.

The Realpolitik Problem

There is also a strategic consequence that exists independently of any allegation concerning taxes, pricing or corporate behavior.

California is exchanging one form of energy vulnerability for another.

A functioning refinery physically located inside California is an industrial asset largely within American jurisdiction. It can certainly suffer outages, accidents, earthquakes, labor problems or shortages of crude feedstock, but disrupting its actual refining operation from overseas is difficult.

An imported petroleum product depends upon a much longer chain. The foreign refinery or blending facility must remain available, the exporting country must permit the sale, the loading terminal must function, a tanker must be available, insurance must remain obtainable at an acceptable price, the maritime route must remain open and California's receiving terminals must be capable of accepting the cargo.

Multiple foreign suppliers can certainly provide diversification. Losing one overseas refinery therefore need not have the same consequences as losing one of California's remaining major refineries.

But supplier diversity is not necessarily the same thing as supply-chain diversity. Ten suppliers whose products must ultimately reach California by sea still share an important common dependency upon maritime transportation.

Recent events surrounding the Strait of Hormuz have demonstrated how quickly tanker availability, marine insurance, chokepoint risk and geopolitical uncertainty can affect petroleum transportation even when the underlying oil fields and refineries remain perfectly capable of producing petroleum.

There is no need to argue that California intended to create such vulnerability. Intent and consequence are separate questions.

The more useful question is whether California's energy transition has unintentionally transferred part of its energy vulnerability from infrastructure largely within American jurisdiction toward an international maritime network over which California exercises considerably less control.

That question becomes more important, not less, while petroleum demand remains substantial.

What We Still Need to Know

Aggregate Energy Information Administration statistics can take this investigation only so far. They tell us that petroleum moved between jurisdictions and identify broad product categories, but they generally do not tell us who owned each individual cargo or what happened to it while inside a particular storage facility.

The next stage therefore requires transaction-level information.

For the approximately 7.969 million barrels of Bahamas-attributed gasoline blending components entering the West Coast during 2025, we would want to identify the date of each shipment, the vessel and IMO number, the Freeport loading terminal, cargo quantity and classification, consignee or importer and final West Coast destination.

Then the investigation moves backward from Freeport. Which tankers had previously delivered petroleum into the terminal? What products did they carry? Which storage tanks received them? Was the material segregated or blended? Who owned it while it was in storage? Did ownership change? Who sold the outbound cargo, what was its declared value, and was the American importer related to the foreign seller?

With those records, three histories could be reconstructed simultaneously.

The first would follow the physical barrel and determine where the petroleum actually traveled. The second would follow title and establish who owned the material at each stage. The third would follow the money and determine where its value increased, who captured that increase and where the resulting profit was recognized.

If those three trails reconcile cleanly, we will have documented an unusually complicated but economically comprehensible petroleum supply chain.

If they don't, the discrepancies themselves will tell us where the next questions need to be asked.

Why the Bahamas?

We began with a deceptively simple question: Why would California import petroleum from the Bahamas?

The answer is that the Bahamas doesn't need to produce petroleum to become important to the petroleum market. Freeport possesses something potentially just as valuable: an advantageous location, enormous storage capacity, deepwater tanker access, blending capabilities and an established international trading infrastructure through which petroleum from different sources can be aggregated and redistributed.

That explains why petroleum goes there.

What it does not yet completely explain is why petroleum movements between the United States, the Bahamas and the West Coast changed so dramatically just as California's domestic refining system began contracting.

C California policy may also have unintentionally made that offshore solution economically preferable to producing the same petroleum products domestically. The international structure may provide tax or trading advantages as well, and circulating American petroleum through the international product market may have consequences for the prices ultimately paid when petroleum products return to the United States.

Several of those explanations could be true simultaneously.

We don't need to decide which one we prefer before seeing the evidence. Nor do we need to assume wrongdoing simply because the supply chain is complicated.

We need to determine what happened to the petroleum.

That means following the barrel from its original source into Freeport and onward to its eventual destination, following ownership as the product is stored, blended and traded, and following the money as value is added and profits are recognized.

Follow the barrel, follow the ownership and follow the money. Then see whether all three arrive at the same place.

Endnotes

[1] U.S. Energy Information Administration, petroleum exports from the U.S. Gulf Coast to the Bahamas, including unfinished oils and gasoline blending components, 2024–2025.EIA petroleum movement data

[2] U.S. Energy Information Administration, West Coast petroleum-product imports from the Bahamas, including gasoline blending components, 2022–2025.EIA petroleum imports data

[3] Buckeye Partners — Pipelines & Terminals. Buckeye describes the Bahamas hub's storage, blending, throughput and build/break-bulk capabilities.

[4] International Monetary Fund, The Bahamas: Technical Assistance Report—External Sector Statistics Mission, 2025. The IMF discusses petroleum discrepancies arising in part from the distinction between physical movements and changes of ownership.IMF Bahamas statistical report

[5] Argus Media, 2026 reporting using Kpler tanker data describing U.S. Gulf Coast gasoline movements into Freeport and subsequent Bahamas petroleum exports.Argus Media report

[6] Phillips 66, announcement concerning cessation of operations at its Los Angeles-area refinery.Phillips 66 refinery announcement

[7] Valero Energy, financial reporting concerning its California refinery assets and planned cessation of refining at Benicia.Valero investor materials

[8] California Franchise Tax Board, Water's-Edge Manual, including guidance addressing transfer pricing and transactions involving excluded foreign affiliates.California FTB Water's-Edge Manual

[9] California Franchise Tax Board, instructions governing California water's-edge corporate reporting.California FTB Form 100-W instructions

[10] California Energy Commission, information concerning California gasoline pricing, refinery conditions, fuel specifications and the state's relative isolation from interstate petroleum-product pipelines.California Energy Commission — What Drives California's Gasoline Prices?