I have always taught my economics students that there is no such thing as a shortage; there is only a shortage at a certain price. If there is a shortage of something at a low price, the excess quantity demanded will drive prices up. These higher prices will induce an increase in the quantity supplied and a reduction in the quantity demanded until a price is reached at which the quantity supplied equals the quantity demanded == no shortage.
But for this basic analysis to apply, markets must be relatively free to work relatively smoothly. In too many jurisdictions, political pull and vested interests lead to prices that do not, indeed cannot, respond to market forces. Politicians and their crony supporters bugger things up. And that is what has happened with water in California.
Here is a pretty good summary from the Washington Post. Unfortunately it is missing this simple overview about the price system and gets into blaming certain uses too much. The list and the accompanying graphics are quite informative. Here is the list; see the full article for the explanations:
8 fascinating images explain California’s dangerous drought
1. California is one of the most-drought stricken regions of the U.S.
2. Things have gotten worse since then.
3. You don't need a PhD to see why California is in trouble.
4. California's water crisis isn't really due to its people.
5. Agriculture is the much bigger consumer of California's water.
6. Almond shaming is justified.
7. But almonds aren't the only offenders.
8. Power generation is another major hidden consumer of water.
Remember through all this that agriculture uses so much water because California's price for using water in agriculture is so low. There is a LOT of agriculture in California that is inefficient and doesn't belong there. It wouldn't be there if the users of that water had to pay prices for the water that reflect the full costs of using it. And if water were priced appropriately, there is a LOT of agricultural land that would be worth a LOT less than it is now.... look at agricultural landowners as the primary beneficiaries of water prices that are too low.
But in addition to agriculture (and other) cronyism, there is another type of political pressure that has contributed to the water shortage (at current prices): Environmentalism. See this.
This is a textbook example of how the media perpetuates a false narrative based on a phony statistic. Farmers do not use 80 percent of California’s water. In reality, 50 percent of the water that is captured by the state’s dams, reservoirs, aqueducts, and other infrastructure is diverted for environmental causes. Farmers, in fact, use 40 percent of the water supply. Environmentalists have manufactured the 80 percent statistic by deliberately excluding environmental diversions from their calculations. Furthermore, in many years there are additional millions of acre-feet of water that are simply flushed into the ocean due to a lack of storage capacity — a situation partly explained by environmental groups’ opposition to new water-storage projects.