U.S. Has Used Up Most Options to Soften the Oil Price Shock
The Trump Administration has already used up most emergency options to rein in the soaring international crude oil prices, which have pushed up U.S. gasoline prices by $0.80 per gallon from a month ago. The U.S. last week tapped the Strategic Petroleum Reserve (SPR) as part of a record-high reserves release announced by the International Energy Agency. The Trump Administration also issued a one-month waiver allowing buyers to purchase sanctioned Russian oil on tankers without repercussions. It also promised, two weeks ago, risk insurance and escort for tankers to help oil pass through the de facto closed Strait of Hormuz. The political risk insurance and guarantees for crossing the Strait of Hormuz, “at a very reasonable price” as U.S. President Donald Trump put it three days into the war, hasn’t materialized yet as shipowners and customers continue to steer clear of the world’s most critical oil route, if they aren’t already trapped there. Since President Trump’s claim that the U.S. would escort tankers through the Strait of Hormuz, if necessary, the Administration has retracted the statement, and the President ended up begging and bullying – often in the same Truth Social post – allies to help reopen the Strait. Despite the efforts of Saudi Arabia to redirect more crude flows to Red Sea exports and away from the Arab Gulf, the stark reality of global oil supply is that it needs the Strait of Hormuz open so it wouldn’t lose an estimated 17 million barrels per day (bpd) of crude and petroleum products this month and next. These volumes cannot be offset by any SPR release or other similar band-aid solution as the strain on the oil and product markets is already too high with just over two weeks of war. Analysts warn that if the Strait of Hormuz remains blocked for a month or two, oil prices could jump to as high as $150 and even $200 per barrel, forcing an economic shock and a massive political shock to incumbent leaders, most of all President Trump ahead of the mid-term elections in November. Band-Aid The President has few options left to contain the fallout, according to Reuters columnist Ron Bousso. These could include considering waiving the Jones Act to allow non-U.S. vessels to move goods, including energy, from one American port to another, and a Congressional move to reduce federal taxes on gasoline and diesel. Yet, these, too, would be a band-aid trying to stop economic and political bleeding from a closed Strait of Hormuz. “I don’t see this as much more than a band-aid with weak adhesive,” Steve Allen, an economist at North Carolina State University, told ABC News, in comments on the U.S. tapping the SPR for a release of 172 million barrels of crude as part of the IEA’s record-high 400-million stocks release. To put into perspective this massive coordinated global release of oil stocks, the biggest in the history of the oil market, it’s worth noting that before the war cut off the Strait of Hormuz from the global oil supply chain, about 600 million barrels of oil were passing through the chokepoint per month. Strait of Hormuz Shock The loss of oil supply cannot be overstated, and the loss of flows through Hormuz cannot be compensated by any bypassing or workarounds from Saudi Arabia to the Yanbu terminal on the Red Sea, or the UAE pipeline to Fujairah outside the Strait of Hormuz. “All of those routes together can only restore flows to roughly half of the pre-war oil exports from the Gulf,” analysts at Wood Mackenzie say. Andrew Harbourne, Wood Mackenzie’s senior analyst for oil markets, notes the 400-million-barrel release will cover only about four weeks of disruption in the Gulf. “Strategic stocks remain an effective emergency buffer, but they are a one-off intervention that must eventually be rebuilt and cannot cover a sustained supply gap,” Harbourne added. Supply shocks in the past suggest that if the war and the disruption in the Strait of Hormuz persist, Brent crude could get to $150 to $200 per barrel. For some, such as diesel and jet fuel, the effective prices could be $200 to $250 a barrel or more, according to WoodMac. Spiking prices would present a macroeconomic and political risk in many geographies and countries, according to J.P. Morgan. “This event generates greater macroeconomic risk than recent military conflicts,” Joseph Lupton, co-head of Economic Research at J.P. Morgan, said on Friday. “Through its potential to disrupt global energy markets and supply chains, it looks likely to have material, lasting political and economic consequences at the regional level.” How fast the U.S. could rally a coalition to try to unblock the Strait of Hormuz – and how successful such would be – would be critical for the political and economic shocks going forward. “Until we see a meaningful resumption of oil flows through the Strait of Hormuz, upward pressure on fuel prices is likely to persist,” Patrick De Haan, head of petroleum analysis at GasBuddy, said on Monday, as U.S. gasoline and diesel prices continued to soar, with diesel topping $5 per gallon.
Nanda Devi LPG tanker arrived at Vadinar
After Indian LPG carrier ‘Shivalik’ reached India, another LPG tanker, ‘Nanda Devi’, carrying about 46,000 metric tonnes of liquefied petroleum gas, has reached the Vadinar Port in Gujarat . Chief Officer of Nanda Devi vessel said that the initiative was taken by the Ministry of Ports, Shipping and Waterways and Shipping Corporation of India, with the Indian and Iranian navies providing the necessary assistance to cross the Strait of Hormuz. He added that the 46,000 metric tonnes of LPG will help India in a time of worldwide crisis due to conflict in West Asia. “I would like to thank everyone who was involved in this operation of crossing the Strait of Hormuz. The initiative was taken by the Indian Ministry, Shipping Corporation of India, with the help of the Indian Navy and the Iranian Navy. Vessel transmitted the Hormuz safely, now it is enroute to Kandla, Gujarat and will be serving a huge amount of LPG, 46,000 metric tonnes. This will help in the worldwide crisis of LPG. We will continue to serve the LPG in future also,” he said.
India Reports 38% Increase in Domestic LPG Production
India has achieved a significant milestone in its energy sector with domestic liquefied petroleum gas (LPG) production recording a substantial increase of 38%, according to a government official announcement. Production Growth AchievementThe reported 38% increase in domestic LPG production represents a major development in India’s energy landscape. This growth indicates enhanced production capacity and improved operational efficiency across the country’s LPG manufacturing facilities.
Gas on the line: will the Iran war squeeze India’s piped gas next?
The Iran war has already rattled India’s liquefied petroleum gas (LPG) market. Now another energy artery is under scrutiny: the country’s rapidly expanding network of piped natural gas (PNG) – gas delivered by pipeline to homes and businesses. Demand for this natural gas comes from fertiliser plants, industry and gas-fired power, as well as city gas networks – which supply PNG to households and CNG (compressed natural gas) to vehicles. Of these, city gas to homes is the standout grower, expanding steadily as the network spreads across urban India. That push is mirrored on the ground: India now has more than 15 million PNG connections, a number rising fast as policymakers nudge households to swap cylinders for gas on tap. War on Iran squeezes India’s cooking-gas supplies At the same time, demand from CNG vehicles has also climbed steadily, with CNG now India’s second-largest auto fuel after petrol. If tankers carrying LPG struggle to pass through the Strait of Hormuz, the question in many urban Indian homes is simple – could the gas in their kitchen pipelines be next to feel the squeeze? Probably not – at least not immediately. India’s piped gas supply is a blend of domestic production and imports of liquefied natural gas (LNG). About half of India’s PNG supply is domestic gas drilled from onshore and offshore fields – for example by companies such as ONGC and Reliance. The balance is met through LNG imports. “No disruption is expected for homes and vehicles [using piped gas]. The government has given priority to these two sectors,” says Rahul Chopra, managing director for the Haryana City Gas Distribution Limited, a countrywide gas company with around 100,000 domestic consumers and 195 CNG fuel stations.
India fuel retailers seek advance payments from dealers as global price surges
Indian three major state-run oil marketing companies, Indian Oil Corporation (IOCL), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) have suspended fuel supplies on credit to retail outlets and are now asking for advance payments, according to a report by Mint. HPCL and BPCL began insisting on upfront payments from last week, while IOCL halted its five-day revolving credit policy on Monday, the report said. Together, the three companies supply fuel to the majority of India’s nearly 100,000 petrol pumps. The trigger for this tightening is the closure of the Strait of Hormuz, which has choked off around 40% of crude supplies to India. India is the world’s third-largest oil consumer, with petro-product demand expected to reach 250.8 million tonnes in financial year 2027. Earlier, these companies offered credit lines stretching for a few days. Fuel outlets told Mint that two common credit facilities, the draft on delivery and revolving credit, have both been halted. Under the draft on delivery system, dealers pay at the end of each day for fuel purchased earlier that day. Meanwhile, under the revolving credit model, pumps receive fuel on credit for three to five days and pay on the sixth day. A third facility, electronic dealer finance, where a bank issues a letter of comfort to the OMC on behalf of the outlet for 15 to 30 days, is still continuing for now, the report added.