US Oil Executives Say Global Fuel Crisis Has Arrived

American oil executives say the global fuel crisis they had warned about for months has now arrived, as inventories shrink, strategic reserves lose their ability to cushion the market, and attacks remove more Middle Eastern supply.

The latest blow came from an attack on Saudi Arabia’s East-West pipeline, a critical route that allows crude exports to bypass the Strait of Hormuz.

Analysts estimate the disruption has stranded at least 2.5 million barrels a day from an already tight market, according to The Wall Street Journal.

“All these mechanisms helped to mitigate the price and supply risk,” Chevron chief executive Mike Wirth said at an energy conference in Austin, Texas.

“Those have largely now played out, and we don’t have nearly the buffers in the system that we did when it began.”

Buffers Run Down

Commercial fuel inventories have been falling globally for more than six months, while strategic crude reserves offer increasingly limited scope for further releases.

That has left the market more exposed to fresh disruptions through the Strait of Hormuz and attacks on alternative export infrastructure.

U.S. crude prices have risen 19% over the past three weeks to about $101 a barrel as attacks across the Middle East multiply.

Iran has targeted tankers traversing the Strait, while Houthi militants operating from Yemen have struck Saudi infrastructure and military sites.

The damaged East-West pipeline runs from the Abqaiq oil field to Yanbu al-Bahr on the Red Sea.

Wirth said he saw little reason to expect prices to retreat quickly.

“I wish I could tell you that I saw some reason why things would ease, but it’s difficult right now to see that happen,” he said.

Diesel Emerges as Key Risk

The squeeze is increasingly visible in refined fuels.

Diesel has climbed to a record $6.23 a gallon, while gasoline has rebounded to $4.32 after slipping below $4 during the summer.

Dan Pickering, founder of Pickering Energy Partners, said diesel supplies were particularly tight because of refinery outages linked to conflicts in the Middle East and Russia.

Demand is expected to rise further as farmers enter harvest season and increase their use of diesel-powered equipment.

“Diesel has no easy solution,” Pickering said.

Some analysts are already fielding investor questions over when higher fuel costs will begin to restrain consumer spending.

White House Seeks More Supply

The Trump administration has maintained that the disruption will be temporary and is looking to Venezuela and higher U.S. refining capacity for additional supply.

U.S. officials have pursued deals intended to increase Venezuelan oil production and met refining executives in early September to discuss expanding domestic fuel-making capacity.

Interior Secretary Doug Burgum rejected speculation that Washington was seriously considering a temporary ban on U.S. exports of refined fuels such as diesel.

“We will do anything that helps the price at home,” Burgum said. “But we’re also going to be smart about it.”

Energy executives and administration officials have maintained regular contact since the conflict began, including discussions between company chiefs and Energy Secretary Chris Wright.

Conflict Raises Longer-Term Risk

Concern inside the industry has intensified as ships and energy infrastructure face attacks in both directions.

Wil VanLoh, founder and chief executive of Quantum Capital Group, said the confrontation's duration increasingly favored actors willing to absorb prolonged economic pain.

China is adding to the supply pressure. After relying heavily on its own crude stockpiles for months, the world’s largest oil importer has recently increased purchases from international suppliers, analysts said.

That return to the market comes as the buffers that previously absorbed disruptions are being depleted.

Executives from ExxonMobil, Chevron and ConocoPhillips had warned U.S. officials in March that a prolonged closure of the Strait of Hormuz could eventually create shortages of refined products, including diesel.

Their concern was that inventories, strategic reserves and alternative routes could soften the impact only for a limited period.

With stocks falling, reserves constrained and Saudi bypass infrastructure now under attack, oil executives say that limit has been reached.