Brouillette: Strait Control Is Iran's "Nuclear Weapon"

Summary

Former Energy Secretary Dan Brouillette discusses Iran's leverage over the Strait of Hormuz, its impact on oil shipping, and the resulting risk premium that could floor oil prices. He also notes that eventual reopening would lower prices and allow SPR refilling, and touches on Jones Act waivers and Russia sanctions.

• Ships are not moving through the Strait of Hormuz at normal levels, contrary to presidential claims.
• Disruption is a key driver of crude oil price swings and could establish a higher price floor via risk premium.
• If the conflict persists for months, WTI and Brent prices are expected to stay near current levels or rise slightly.
• Increased US production and infrastructure have kept gasoline prices from spiking to $7/gallon.
• Low Strategic Petroleum Reserve levels remove a buffer, adding further upside risk to oil prices.
• Full reopening of the strait would eventually cause oil prices to decline and create a refill opportunity for the SPR.
• Jones Act waivers are seen as helpful for shipping competition but the act itself has underperformed.
• Russia sanctions and Ukrainian attacks on refineries affect diesel exports, but a quick end to the conflict could relieve that pressure.