Oil Flows Again, But Prices Stay High
Fuel prices remain elevated despite open Strait of Hormuz, as global oil supply and demand dynamics shift.
2 min read
Despite the Strait of Hormuz remaining open and crude shipments nearing prewar levels, fuel prices have not yet returned to normal. The U.S. Strategic Petroleum Reserve reached its lowest level since 1982, with the administration releasing oil under President Trump’s directive. However, the key issue remains the limited availability of diesel, a critical component for global energy needs.
Global Supply Constraints
Saudi Aramco CEO Amin Nasser described the world’s supply cushion as “scarily thin,” and the situation is expected to worsen. On Friday, G-7 leaders agreed to release 100 million barrels of oil and diesel over four months, with a significant portion of diesel to be released within the first 20 days. Analysts, however, argue that this will only temporarily lower diesel prices by about 25 cents per gallon without addressing the underlying supply issues.
Refined Products Remain in Short Supply
While crude oil shipments are recovering, refined products like diesel make up only 11% of current cargo volumes, down from over 20% before the war. JPMorgan analysts noted that the crude market has largely normalized, but refined product supplies remain constrained due to war-related outages in Middle East refineries. These facilities, which took 15 years to build, are now offline, causing a significant global supply disruption.
Global Refiners Hold Back Diesel
Major Asian refiners in China, Japan, and South Korea are keeping their diesel production for domestic use, leaving the U.S. as a key supplier. The White House had planned a 90-day diesel export ban but scrapped the measure after G-7 countries agreed to release diesel. President Trump emphasized the U.S. and Europe’s role in supplying diesel, stating they will not implement an export ban.
Prices Remain Elevated
Gas and diesel prices have fallen by over 10 cents in the past week but are still far from prewar levels. Trump has repeatedly claimed that prices will normalize once the war in Iran ends. Despite these assurances, the global energy market continues to grapple with supply constraints and inventory rebuilding efforts.
Source: Daily Wire
