A US oil reserve warning that President Donald Trump made in June is drawing fresh attention. Speaking at the Group of Seven summit in France, he said the country could run low on reserves in about four weeks without a deal with Iran. He called the outcome “bedlam” and admitted he feared comparisons to Herbert Hoover, the president tied to the start of the Great Depression. Weeks later, he walked away from the memorandum he had signed and resumed strikes on Iran. The Strait of Hormuz, the sea lane that carries close to a fifth of the world’s oil, closed once more. One buffer has kept the crisis from tipping over. During a three-week reopening, more than 200 million barrels trapped in the strait escaped to market. David Goldman, a CNN Business reporter covering the war, put that at around 17 weeks of supply. That window bought Trump time.
What the Strategic Petroleum Reserve can still deliver
Here is the emergency backstop, and it is thinner than it looks. The Strategic Petroleum Reserve, the federal stockpile held in salt caverns along the Gulf Coast in Louisiana and Texas, has fallen to its lowest level since 1983. Age is the problem. The caverns date to the 1970s and 1980s, and sediment settles at the bottom like gunk in a coffee urn. Goldman warns that a stated 300 million barrels might yield only about 100 million usable ones. That gap is what gives the US oil reserve warning its weight. Commercial stocks look tight too. Cushing oil inventory, the crude sitting at the Oklahoma hub where America’s pipelines meet and prices get set, has dropped to 18.6 million barrels. Traders treat 20 million as the point where pumping turns hard. Below roughly 14 to 15 million, Goldman says, the oil cannot be drawn out at all. A second blockade in the Red Sea, run by the Iran-backed Houthis in Yemen, closes off one of the routes around the problem.
A fuel problem, not only an oil problem
The US oil reserve warning is about fuel as much as crude. Iran has damaged or destroyed about 30 refineries across the Middle East. Russia, hit by Ukrainian drone strikes, has stopped exporting diesel, a trade that once covered 12 percent of world supply. China has capped its own refining as it pushes electric cars. Put together, that is an oil supply shock felt at the pump. In parts of the United States, gas prices have climbed past four dollars a gallon, the highest since 2022. Bloomberg reports that several Asian buyers, among them Indonesia, Vietnam, Pakistan and the Philippines, could hit critical shortages within a month. Europe is exposed as well, with jet fuel stocks at the Amsterdam-Rotterdam-Antwerp hub down about a third since the war began.
The tollbooth at the center of the fight
Strait of Hormuz oil prices have swung from below 70 dollars a barrel to past 100 and back again. Behind that whipsaw sits a single dispute. Iran wants to charge tolls on ships using the strait, and the Trump administration calls the demand unacceptable in international waters. Goldman lays out the awkward exit, which is to let Iran collect the tolls. Both sides would get something. Iran gains the revenue and standing it wants, and the oil starts moving again. POLITICO reports the concession is hard for the White House to accept before the November midterms, while more fighting carries its own cost. Over the longer run, new pipelines could cut the strait’s importance, and Chevron is weighing a line from Iraq to the Mediterranean. For now, the US oil reserve warning stands, and the clock Goldman describes keeps ticking.
