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"Even If the Strait of Hormuz is Open, it Ain’t Open"
by Larry C. Johnson
"It is open. Nope, it is closed. Wait… It is open. What? Closed again? If you are following the media reports on the Strait of Hormuz you are probably dizzy from hearing about the changing status of the Strait of Hormuz. If you think that getting a firm agreement between Iran and the US to open the Strait of Hormuz will result in an instant solution to restoring global oil reserves, think again.
Even if Iran agrees to a 60-day moratorium on charging ships entering and leaving the Persian Gulf a “usage fee” (Trump calls it a “toll”), and the moratorium starts this week, the world still faces some serious economic shocks from the disruption of Crude Oil and LNG. Crude Oil and LNG production will take time to ramp back up to the pre-Ramadan War levels. We still do not have a full assessment of the damage to the Oil and LNG infrastructure in the Gulf nations. Even if all those systems are intact and functioning - they are not - there is still the problem of having the tankers that carry the Black Gold ready to take the shipments.
The tankers, aka ships, that have been sitting idle in the warm, salty waters of the Persian Gulf for four months face months of the maintenance recovery cycle before they will be ready to get back to the task of hauling oil and LNG. An expert in this field explained it to me this way: "Oil tankers are likely to lose weeks to months depending on fouling, coating condition, and drydock access. LNG carriers are likely to lose longer because the hull problem is coupled to cargo-system and gas-management reliability.
For planning, assume crude/product tankers lose 1-3 months in the median case and 3-6 months in the heavy case. Assume newer LNG carriers lose 2-4 months and older/system-stressed LNG carriers lose 4-9+ months. Some vessels will be faster, but the market should plan for a long tail of slow, disputed, or yard-bound tonnage.
The global perspective is clear: physical movement will recover first; commercial availability will recover second; fleet efficiency will recover third. The market will separate clean, documented, charter-ready tonnage from vessels that are merely moving. The maintenance backlog will be the next bottleneck after Hormuz."
Besides the delay in getting tankers back on the high seas, there is the problem of the Middle-Distillate Inflection Point. What the hell is that? As you can see in the image at the top of this article, a barrel of oil is not like a can of Coca Cola, i.e., a consistent liquid from the top to the bottom of the can. A barrel of Oil consists of segments, with the middle-distillate portion of the barrel providing the raw material from which both diesel and jet fuel are derived. That segment is the critical fuel for the real economy because diesel runs freight, rail, agriculture, construction, and distribution, while jet fuel supports both civil aviation and military air operations.
The structural constraint at the heart of the current energy crunch is the refinery barrel itself. Military jet fuel (JP-8) and civilian diesel are not refined from separate barrels - they compete for the same distillate cut from every barrel processed. So if Trump orders the Pentagon to start bombing Iran again, that will trigger draw downs on stocks - assuming the ops tempo in the Gulf is sustained - and refiners will face pressure to tilt output toward JP-8, which directly squeezes the supply of diesel and civil aviation fuel. In other words, there is no free barrel; every gallon of military fuel is a gallon not available to a trucking company, a farmer, or an airline.
Of all the downstream effects, diesel tightness is the most economically dangerous and the fastest-moving. Unlike gasoline, which is a consumer cost, diesel is an input cost - embedded in every freight shipment, every food delivery, every industrial process. When diesel tightens, the price increase doesn’t stop at the pump; it cascades through supply chains and lands simultaneously on freight rates, grocery prices, manufacturing margins, and retail costs. That kind of broad-based input inflation is one of the more reliable causes of recession, because it compresses margins economy-wide while simultaneously suppressing consumer purchasing power.
This helps explain why Donald Trump pivoted so quick to support the MoU with Iran. The real allocation question is not whether to release the SPR or whether to jawbone OPEC into producing more - it is how hard to run the war. Every incremental increase in operational intensity consumes distillate that the domestic economy cannot easily replace, tightening a transmission belt that runs directly from the Strait of Hormuz into Main Street prices. The tradeoff between war intensity and economic stability is not an abstract strategic concern; it is a daily refinery scheduling decision with macroeconomic consequences.
Here is the problem: currently, the US has approximately a 30-day supply of diesel. It is estimated that somewhere between 8% (VLCC class alone) and a figure approaching 15–20% of the broader crude and product tanker fleet is either stranded or effectively withdrawn from global circulation - a supply shock to shipping capacity that compounds the underlying oil supply disruption. This means there is no ready, quick solution to fill that gap in 30 days. In fact, the delay to restore the US supply of diesel could last as long as 60 days. In short, oil is not going to flow fast enough globally to meet existing demand, which probably accounts for Trump sudden decision last week to sign the MoU with Iran. A knowledgeable expert who provided me with this information believes that we will hit the wall of diesel shortage in July. How’s that for cheery news?"
o
Judge Napolitano - Judging Freedom, 6/22/26
"Larry Johnson: Why Iran Still Controls Hormuz"
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