"People May Not Be Able to Buy Gas by July"

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American Finance, 4/16/26

"People May Not Be Able to Buy Gas by July"

"People may not be able to buy gas by July. The International Energy Agency has characterized the closure of the Strait of Hormuz as the largest supply disruption in the history of the global oil market. The strait, through which approximately 21 million barrels of petroleum per day normally transit, has been effectively closed since February 28th when the United States and Israel launched strikes against Iran and Iran responded by shutting down the waterway that moves one-fifth of the world's oil. Brent crude surged 64 percent in one month to $126 per barrel. Dubai crude hit $166, an all-time record. Gas prices in California exceeded $6 per gallon. The national average went from $3.01 to above $4. Diesel surged from $3.89 to $5.37. The 32 member nations of the IEA unanimously agreed to release 400 million barrels from strategic reserves. That 400 million barrels represents four days of global consumption at 105 million barrels per day. The April ceasefire failed to fully reopen the strait.

The IRGC declared Iran would continue using the strait as a pressure point. Iran has established a tolled passage system charging over $1 million per ship for transit, selectively allowing ships settling in yuan while blocking Western-linked shipping. The bypass pipelines in Saudi Arabia and the UAE can handle only 3.5 to 5.5 million barrels per day against 21 million in normal strait traffic. The net shortfall is 14.5 to 16.5 million barrels per day. QatarEnergy declared force majeure after attacks on its export facilities, stating the damage would require many years to recover from. Saudi Arabia's largest refinery was targeted by drone attacks. The US Strategic Petroleum Reserve held 415 million barrels as of February, down from 714 million barrel capacity. Maximum drawdown is 4.4 million barrels per day and oil requires 13 days to reach markets after a release order. American refineries are operating at 90 to 93 percent utilization with capacity declining since 2020 as facilities have permanently closed. The remaining capacity is concentrated on the Gulf Coast, the region most vulnerable to hurricanes beginning June 1st. Gas stations carry one to three days of supply.

The summer driving season increases demand by 400,000 to 600,000 barrels per day above the winter baseline and peaks around the Fourth of July. Australia's prime minister addressed the nation urging citizens to take public transportation. Hundreds of Australian gas stations reported shortfalls. India saw panic buying with long queues despite sufficient reserves. The Philippines declared a national energy emergency. South Korea imposed a five-month restriction on naphtha exports. The Colonial Pipeline attack in 2021 showed that a six-day disruption to a single pipeline emptied gas stations across the southeastern United States with fistfights at pumps and people filling plastic bags. The current crisis is now in its seventh week affecting the entire global oil market. Diesel powers every truck that delivers every product. The war more than doubled kerosene-based fuel prices because refineries lack the heavy sour crude from the Gulf that is optimally suited for diesel production. Diesel at $5.37 adds 10 to 15 percent to food transport costs on every product on every shelf. The diesel-gasoline spiral means expensive diesel delays gasoline deliveries which empties stations which triggers panic buying which drains remaining supply faster."

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