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The fuel problem is about to become a fuel crisis.
On Monday, the Houthis in Yemen threatened to block Saudi oil shipments through the Red Sea. That could further reduce the world’s oil supply by 4-5 million barrels per day, which is already strained by the war with Iran.
Saudi Arabia had been using its East-West Pipeline to bypass Hormuz, sending as much as 5 million barrels of crude per day to the Red Sea port of Yanbu for export. A successful Houthi blockade could now put much of that supply at risk. It may not stop the oil altogether, but it could force tankers to stop sailing, pay far higher insurance costs or attempt longer and more expensive routes.
And will that extra cost be passed down to consumers? I’m going to go with yes on that hypothetical.
This comes at a time when U.S. commercial and strategic crude inventories have fallen to roughly 43 days of refinery demand, their lowest level in 45 years. The Strategic Petroleum Reserve alone is down to 316.5 million barrels, its lowest level since 1983, after Washington released nearly 100 million barrels to help offset the shortage created by the Iran war.
America is not 43 days away from running out of oil: domestic wells are still producing and imports continue. But the emergency cushion that has helped contain fuel prices is rapidly thinning.
If both Hormuz and the Red Sea remain impaired, the next phase will be measured not simply in oil prices, but in gasoline, diesel, airfares, shipping costs and inflation.
With this economic fallout, you would think the U.S. would turn down the temperature of its war with Iran but President Trump does not seem poised to do that. He posted on Tuesday that Iran will pay “many times over” for every American soldier that is killed.
The Pentagon confirmed that at least two service members died in Jordan last week when Iran struck the Muwaffaq Salti Air Base. A third person may have also been killed but has yet to be identified.
The U.S. bombed Iran for a 10th consecutive night on Monday and Iran continued its retaliatory strikes.
So much for peace.