Crude oil is moving through the Strait of Hormuz again at close to prewar volumes, but a persistent shortage of diesel and refined fuels is keeping prices elevated for American drivers, according to industry analysts and recent market data.
The strait, a critical chokepoint for global oil shipments, remains open this week with crude tanker traffic nearing levels seen before the conflict with Iran, but the makeup of those cargoes has shifted sharply. The Wall Street Journal reported that crude is flowing through the strait at roughly 76% of prewar levels, while refined products such as diesel now account for only 11% of cargoes, down from more than 20% before the war. That gap matters because diesel powers trucks, trains, and farm equipment, and its price feeds into the cost of nearly everything else.
Analysts say the crude market has largely stabilized even as the refined product side remains constrained. JPMorgan analysts, in comments reported by CNBC, noted that while crude flows have normalized, the supply of refined fuels has not kept pace. The reason is straightforward: missile strikes and other war-related damage have knocked Middle Eastern diesel refineries offline. The region spent 15 years building large-scale refineries designed to export diesel and jet fuel, so when those facilities go down, the world loses a major supplier.
That supply shock is colliding with an already thin global cushion. Saudi Aramco CEO Amin Nasser on Monday described the world’s spare supply capacity as “scarily thin,” according to the Financial Times, and he warned it is about to get thinner. On Friday, leaders of the Group of Seven nations agreed to release 100 million barrels of oil and diesel from emergency reserves over four months, with a large share of the diesel set to flow in the first 20 days.
Andy Lipow, president of Lipow Oil Associates, told NBC News that the coordinated release could temporarily reduce diesel prices by about 25 cents per gallon. But he cautioned that it does little to address the core problem. “A release of this magnitude could temporarily reduce diesel prices by 25 cents per gallon but does little to increase refinery capacity to produce more,” Lipow said.
The reserve drawdown comes as the U.S. Strategic Petroleum Reserve has fallen to its lowest level since 1982, when the emergency stockpile was still being built. According to the Energy Department, the reserve currently holds 283.8 million barrels, well below its typical range of 500 million to 600 million barrels and its maximum capacity of 714 million. The administration is drawing down the stockpile under a 172-million-barrel release that President Donald Trump ordered in March after Iran restricted exports through the strait.
Countries that could add supply are instead keeping it closer to home. Major Asian refiners in China, Japan, and South Korea are holding onto the diesel they produce rather than exporting it, leaving the United States as a key global supplier. The White House had been preparing a 90-day diesel export ban but scrapped the measure after G-7 countries agreed to release diesel from their own reserves, Politico reported.
Trump, speaking last week, praised the international coordination. “Europe has a lot of diesel, and they’re going to be making a major world contribution, and so are we,” he said. “And we’re not going to be doing the export ban.”
For now, prices are moving in the right direction but remain far above prewar levels. Over the past week, the average price of a gallon of gasoline and diesel has each fallen by more than 10 cents. Trump said on Thursday that he expects the trend to accelerate: “I will tell you the energy prices are gonna be rapidly, rapidly coming down.” The administration has repeatedly argued that prices will normalize once the war in Iran ends.
Energy analysts are less certain. Even with crude flowing and emergency reserves tapped, the diesel bottleneck reflects a refining and refining-capacity problem that cannot be solved by releasing barrels alone. Until Middle Eastern refineries come back online and Asian producers return to export markets, consumers are likely to keep feeling the squeeze.
The White House has not announced a timeline for when it expects pump prices to return to prewar levels, and the Energy Department did not immediately respond to a request for comment on the reserve’s current level.
Source: www.dailywire.com — https://www.dailywire.com/news/oil-is-flowing-again-heres-why-your-prices-arent-back-to-normal-yet