America Has a Bigger Oil Problem Than Hormuz
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Key Points:
- The US strategic release is running roughly six weeks past its own 120-day delivery schedule, with about 50mb of the 172mb undelivered and only 12mb unassigned, leaving Washington without a usable oil lever before the midterms.
- Treasury and the Fed intervened jointly with Tokyo on 31 July, selling euros for yen and opening the FIMA repo line so Japan could borrow dollars against its $1.116tn of Treasuries rather than sell them.
- Global spare refining capacity has fallen from 11.12 mb/d in 2020 to 2.82 mb/d in 2026, a 75% collapse that puts a hard ceiling on diesel and gasoline supply regardless of how Hormuz resolves.
America has run out of leverage. They cannot hold a siege from an oil reserve which is at a 1983 low, a national debt at $40 trillion and a bond market that is starting to leak. Out of the 172mb of strategic release oil, there remains 50mb at SPR, with only 12mb of this unassigned. The relief valve is now about to run dry. It is easy to see that Iran has the wind at their back, as the temperature is rising on an administration that has been flying too close to the sun. Over the last 2 weeks, Iran have stated they will simply wait until the end of Trump’s presidency in Jan 2029. Notwithstanding this, there are further winds blowing against this latest edition of US adventurism. They include…