Gasoline prices could surge due to critical oil shortage
Recently, gasoline prices in the US have slightly decreased: the average dropped to $4.22 per gallon. This is lower than $4.39 last week and $4.48 a month ago. However, according to Politico, this temporary relief may be short-lived.
Oil industry representatives are warning the Trump administration that oil reserves are reaching ‘dangerously low levels’. Due to the closure of the Strait of Hormuz, companies are forced to tap into strategic reserves, which are rapidly depleting. This could lead to a sharp spike in energy prices within weeks.
Warnings from experts and oil company executives
One industry executive stated that they warned ‘the highest levels of government about what will happen in mid-to-late June’. He added, ‘I hope they are paying attention to inventory levels now. We are hitting the bottom of the tanks.’
While administration officials try to downplay the issue, industry representatives are already discussing it publicly. At the 42nd annual Bernstein Strategic Decisions Conference, ExxonMobil Senior Vice President Neil Chapman noted:
We are approaching unprecedented low inventory levels. I mean, really, very low levels.
He also suggested that when reserves hit a critical point, the price of Brent crude could soar to $150-160 per barrel. For comparison, Brent is currently trading just below $93, meaning a potential increase of 61-72%.
Impact on consumers
According to Chapman, at $150 per barrel, gasoline prices in California could reach $9 per gallon. This is significantly higher than the current average of $5.95.
Despite denials from Washington, data from the Energy Information Administration indicates the severity of the situation. US crude oil reserves fell by 8 million barrels last week, marking the eighth consecutive weekly decline. They are now 3% below the five-year average. Commercial petroleum product inventories have decreased by 52 million barrels since the start of the war in February.
Geopolitical impact and strategic reserves
Massive supply disruptions due to the closure of the Strait of Hormuz have been partially offset by releases from the strategic reserve. This was part of coordinated international efforts to curb prices. However, global oil reserves have been declining by about 5.8 million barrels per day since the start of the war.
The situation is complicated by escalating tensions between Iran and the US. Representatives of the Trump administration have repeatedly stated that a deal is close, but no concrete results have emerged yet.
Even if an agreement is reached and the Strait of Hormuz is fully reopened, the situation will not return to its previous state immediately. The market will need time to recover, and consumers may feel the effects of this crisis for a long time. It is worth noting that such fluctuations in oil prices have a global impact, and Ukraine, as an energy importer, may also experience rising fuel and related goods costs in the coming months.