Today's oil price is still wrong and too low, says Amos Hochstein
Speakers
Amos Hochstein
— Senior Advisor to the President for Energy and Investment
Summary
Amos Hochstein argues that quoted crude oil prices remain too low because Middle East supply disruptions, damaged bypass infrastructure, depleted reserve buffers, and a lack of policy support have removed safety nets. He notes that official flow reports look exaggerated and that physical barrels are trading well above paper futures. Hochstein also emphasizes extreme tightness in refined products, with diesel and gasoline pricing equivalent to much higher historical crude levels due to refining and export constraints. He doubts a U.S. request for Ukraine to stop attacking Russian refineries will fix the global refined-product situation.
- Saudi Arabia's East-West pipeline shutdown lifted WTI after drone attacks.
- Hochstein says WTI and Brent quotes remain too low versus physical markets.
- He cites depleted reserves, ineffective Hormuz transit, and Houthi control of Bab al-Mandab.
- Diesel and gasoline are described as exceptionally tight due to refining and Gulf export shortages.
- Hochstein says CENTCOM/White House flow figures look exaggerated versus market data.
- He sees the administration's response as stuck with no clear energy-market fix.
- He doubts Ukraine will halt Russian refinery attacks and says damage is already significant.
Ideas
Quoted oil prices are still too low
Amos Hochstein argues today's quoted WTI (~$103) and Brent (~$107-108) prices are still wrong and too low because the market has lost its safety nets: SPR/reserve supplies are dwindling, Hormuz is effectively not functioning, the East-West Saudi pipeline bypass is damaged/gone, Bab al-Mandab is controlled by the Houthis, and Middle East volatility keeps worsening. He also says physical barrels are clearing between $120 and $150 while paper futures remain far lower, reinforcing that crude prices need to rise.
Diesel and gasoline are extremely tight
Hochstein says consumers do not buy crude but refined products, and diesel and gasoline are extraordinarily tight. Diesel around $6.20 is equivalent to roughly $200 oil based on the last 15 years, while average U.S. gasoline near $4.30 is equivalent to about $125-$130 oil. The tightness comes from shortages and scarcity in gasoline/diesel production and refining, and refined products are not getting out of the Gulf at the same rate as crude, so these product markets remain supported.
