Trump drained the Strategic Petroleum Reserve to lose a war on Iran.
A 9.6% single-day jump in Brent crude is the kind of price move a small-engine shop in central Wisconsin absorbs in a week. The diesel that runs my Silverado, the gasoline that runs the chainsaws and snowblowers my customers bring in for repair, the propane that heats the shop through a February in Friendship — every one of those prices is set in a market the Strait of Hormuz anchors. The market moved Monday because the Trump administration reimposed the U.S. naval blockade on Iranian shipping through the strait, after a five-week pause that produced the result every serious analyst had predicted: it did not work. Iran kept shipping. June volumes, per United Against Nuclear Iran, came in close to prewar levels. Three days before this piece ran, our colleagues reported the strait had gone quiet under the new round of strikes. The market is now repricing the lesson.
The price move is the symptom. The disease is the policy. The Trump administration has reimposed a naval blockade that the State Department, the Pentagon, and every Iran-watcher in Washington have been trying to make work for forty years and counting. About a fifth of the world’s oil passed through the strait before the war. You cannot fully protect a chokepoint that narrow with naval vessels alone. Daniel Yergin’s The Prize tells the whole twentieth-century arc of American energy and military power: the 1980s Tanker War, Operation Earnest Will, the reflagging of Kuwaiti tankers, the USS Stark — a multi-year commitment and a permanent CENTCOM presence and still the strait did not close to traffic. Any administration with access to CENTCOM’s institutional knowledge knows this. The current administration decided to do it again.
What the country is paying for the privilege is the Strategic Petroleum Reserve. The reserve’s whole purpose, going back to the 1975 Energy Policy and Conservation Act that created it in the wake of the 1973 embargo, was to give the United States a cushion against exactly this kind of supply disruption. The reserve held over seven hundred million barrels at peak. It is now at the lowest level since 1983. The Trump administration has been selling crude out of the reserve, the Wall Street Journal reports, “in an effort to keep fuel prices in check.” The barrels sold to suppress pump prices were the strategic cushion that might have blunted the next shock — and the next shock came anyway, because the policy the cushion was funding is the one that caused it. The reserve exists to be spent. What the country got for this spending is an oil war with Iran that is not producing the result the policy was sold to produce.
The other thing happening, the Journal notes, is that producers from Texas to Kazakhstan to Brazil to Venezuela are ramping up. U.S. crude and petroleum-product exports hit records this spring. The frackers in the Permian and the Bakken and the Eagle Ford are pulling oil out of the ground at a rate the world has not seen, and the world is now buying it because the alternative — Gulf crude through Hormuz — looks less reliable by the week. Asian oil buyers are taking more cargoes from Latin America, West Africa, and the U.S. to rebuild their strategic stockpiles and reduce their exposure to the strait. The shale revolution keeps paying a dividend no one in Washington planned for. The United States is, in effect, displacing Iran and Saudi Arabia in Asian energy markets by default.
The bind is that the dividend is being spent at the same time the strategic reserve is being drained to keep gas cheap at the pump. The United States is doing the Saudi Arabia thing — selling crude into a hot market to keep the price of gasoline low — while also conducting a naval blockade of a regional power that is not surrendering and is not going to surrender. You can do one of those things at a time and do it well. You cannot do both at the same time and do either of them well. The Gulf producers are not waiting for the United States to figure this out. Saudi Arabia is moving more crude west to the Red Sea by pipeline. The United Arab Emirates is investing in pipeline and port capacity outside the strait. Iraq is trying to revive land routes through Turkey, Syria, and Jordan. Goldman Sachs, in a note to clients cited in the Journal, says new and expanded pipelines could allow more than forty-five percent of prewar Gulf oil exports to bypass Hormuz by the end of 2027. If plans are accelerated, the figure is seventy-five percent by the end of 2028. The Saudi and Emirati planners are voting with their capital that the strait is not coming back as a transit route.
Clionadh Raleigh, who runs ACLED, the conflict-monitoring group, said it plain in the Journal: “Unless there is some sort of major knockout — which the U.S. has so far been unable to produce — I struggle to see a negotiated solution.” That is a conflict-data analyst with a long track record telling you this is not a war with an end. It is a structural condition. The working-class household at the end of the supply chain pays the price for that structural condition every time it fills a tank — and the strategic reserve that was built to absorb exactly these shocks has been sold off to fund the policy that created them.
This is what the nationalist shell game looks like in practice. The policy is sold to voters as American strength. The bill is sent to the same voters in propane and diesel and gasoline. The reserve gets drained. The result in Tehran does not come. The policy that would actually serve working-class households here is the policy that stops the blockade, replenishes the reserve, and lets the shale dividend do the work it is already doing. That policy is not the policy the administration is running. The shop in Friendship will be paying the difference this winter.