The Journal. - The World is Running Out of Fuel

Episode Date: September 21, 2026

After the war in Iran began, several measures went into effect to keep oil prices under control. Governments and companies tapped their reserves and illicit oil became more available. But as the war continues, those buffers have now been depleted and the pain is starting to worsen. WSJ's Benoît Morenne breaks down how we got here and Owen Tucker-Smith explains what it means for some businesses. Ryan Knutson hosts. Further Listening: - Inside the U.S. Deal to Get Venezuela’s Oil  - Can an ‘Economic D-Day’ End the Iran War? Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Since the war in Iran has been going on, oil prices have been going up. But they actually haven't gone up as much as people thought. How high are oil prices right now? They are high. But they could be higher. And something that's been stunning to a lot of people is, why isn't it higher based on what's happening in the extent of the disruption? That's our colleague Benoit Maren, who covers the oil industry.

You know, for most of the years, people are like, oh, we're going to drive off the cliff. And then we're like, oh, actually wheels still on the ground. We're okay. It could be worse. For the last few months, the world has found workarounds to keep the worst-case scenario at bay by doing things like tapping strategic reserves or releasing sanctioned oil. But now, it's starting to look like the world is running out of those band-aids.

And oil executives are ringing the alarm that prices are about to go up. We've bought time for the past, you know, six months. And now time has finally run out, right? All those solutions are finally gone, right? And people are, again, talking about, oh, we're going to be potentially hitting, you know, tank bottoms, which is when crude levels are so low in tanks that you cannot, you literally cannot pull it out. I mean, this sounds bad. It is pretty bad.

It is pretty bad. And I was at a conference just, you know, a couple of weeks ago. And when I was running into a CEO that I knew or at Alice, I asked them, is this it? Like, it's just the turning point. It's this inflection point. This is the driving of the cliff. And everyone said, yep, this is, yes, this is it. Welcome to The Journal, our show about money, business, and power.

I'm Ryan Knitson. It's Monday, September 21st. Coming up on the show, the fuel crisis is finally here. This episode is brought to you by IG Private Wealth. When your financial life gets more complex, having a clear plan matters. IG advisors build personalized, integrated financial plans that connect your investments, tax strategies, retirement income, and estate planning into one coordinated plan. They will help you make confident decisions about your wealth and your future. Get financial advice that puts you at the center.

Visit IGprivatewealth.com to find an advisor near you. When Iran shut down the Strait of Hormuz at the start of the war, it prevented about 20% of the world's oil from reaching the market. It's supremely important, and it was known that if Iranians for some reason decided to shut down the strait, this would have massive ramifications for the global economy. You know, when Trump administration struck some of those Iranian sites, people were like, oh, what if Iran decides to close the strait? But it was really seen as the nuclear option, one that no one wanted to see because it would be so bad for everyone involved. As soon as the street was closed, oil prices shut up.

They rose from around $70 a barrel to well over 100. But soon, markets found a number of workarounds that stabilized prices. First, the U.S. government tapped into what's known as strategic petroleum reserves. Massive storage sites filled with backup oil, but the U.S. has held on to for decades, just in case. That's been in place since the after the Arab oil embargo of the 1970s. And as a result of that, the U.S. decided that it'd be a really good thing. to have a bunch of crude stored up

and salt caverns on the Gulf Coast that you could tap into if something like that was to happen again. And it's not just countries that have oil reserves like this. I understand companies have them too. You have commercial stocks as well, right? And those are something that, you know, refiners can tap into,

and those levels were really high going into the conflict. So people could look at it and say, okay, we have good buffers. When the U.S. government and companies tapped into those reserves earlier this year, it helps slow the rise of oil prices. Traders and Alice looked at and said, okay, that's good. We have like a response. We have one buffer. It's not going to be enough to see us through this crisis if it goes on for too long. But provided that it is short, as the administration is saying, we will be maybe okay.

We're going to have a glut of oil this year. So hopefully we're not going to be, you know, hitting tank bottoms, right? We'll have enough to see us through this. Strategic reserves aren't the only buffer that has helped to ease some of the price pressure. Another one is actually coming from illicit oil. There's a giant glut of sanctioned oil tankers sitting at sea that was produced by countries like Iran and Russia. The U.S. had sanctioned that oil, making it unavailable the most of the market. In March, though, the U.S. temporarily allowed other countries to buy this sanctioned oil. So, you know, if a refiner wants to get a delivery of oil from a Russian dark fleet tanker,

it can do that, right? The third buffer has to do with China. China is the world's biggest oil importer. It typically buys around 12 million barrels of oil a day, which is around 10% of all the oil in the world. But earlier this year, China stopped buying so much. They pulled back by something like three million barrels. So that's freeing up a bunch of barrels that other countries were then able to get their hands on. And that's a big deal when you think about how many barrels were not leaving the straight of our humus, right? So what was the overall impact that these buffers had on the price of oil around the world? It contained oil prices. It made it so that they didn't shoot up all the way to, you know, $130 or $140 bucks or a barrel, which is the stune.

state scenario that people were concerned about, and thanks to all those buffers that we just got into, this did not come to pass. Instead, crude oil has roughly stayed under $100 a barrel, and it's kept a lid on gas prices, too, which have hovered around a national average of just under five bucks. The Trump administration, meanwhile, has continued to say the oil crunch is temporary. And the war's going to end soon, and when it ends, your gas prices are going to drop to a level that they were before maybe even lower. In June, that prediction appeared to becoming true

when the U.S. and Iran began peace negotiations and agreed to a ceasefire. And people think, oh, finally, this is what we've been calling for. This might be the end of it, finally. And Alice, at the time, are doing this 180, which is kind of crazy to think about. They go from, oh, this is a crazy shortage of crude to there's a glut of crude coming in the market.

We're going to have too much oil and oil prices are actually going to fall to 70 bucks a barrel and maybe as low as 60 bucks a barrel. So we've completely whipsawed in just a matter of months. But that didn't happen. Instead, the peace deal fell apart just weeks later. Here we go again. Iran reportedly closed the Strait of Hormuz following Israeli attacks on Lebanon today.

Pensions in the region remain high. Today, Iran said the Strait of Hormuz will be closed again after Iran accused the U.S. and Israel of violating the memorandum of understanding. President Trump says he considers the ceasefire with Iran over. We hit them very hard last night, very, very, very, probably hit them hard again tonight. I'll give him a little warning. We're going to hit them hard tonight. So now we're kind of almost back to where we were when this conflict started. This straight of Hormuz is closed.

Some oil supplies were still cut off from that region. How have those buffers been drawn down? down day after day the last six months. How much is left? So if you think about it, we're exhausting commercial inventories. We've tapped strategic reserves so that's, you know, national stocks, mostly in the U.S., and there's only so much you can tap after this. And what's happened is that you've drained all of those buffers month after month of this crisis not being resolved. There's no more, you know, fanciful scenarios of this could be over tomorrow, it's not going to get worse.

This is finally, the rubber hits the road. So far, the U.S. has taken out over 130 million barrels from the Strategic Reserve. There's still some 280 million barrels left. That might sound like a lot, but the government has only authorized

the release of a certain number of barrels, and it's getting closer to hitting that limit. And this time around, there's an additional problem. The industry is now also facing a refinery crisis. You've had strikes on refineries in the Middle East in the context of this war. And at the same time, Ukraine has taken off a bunch of refining capacity in Russia as part of defending itself.

And, you know, Russia is the world's second largest export of diesel, which is a really important fuel that, you know, trucks use and that is used to ship goods around. It's really the lifeblood of the economy. And so that's added on to the shortage in the Middle East. and if the refineries out, if it's been damaged, you're looking at months to put this back on. So right now, there's just not the capacity in the refineries to produce the fuel that the world needs. The Trump administration has been talking about how Venezuela

will be a solution to this problem, that we can start producing oil there to use in the U.S. How soon could all of those reserves come online? So the reserves are there, It's probably the largest such reserves in the world. The issue is that it's going to take a long time before you significantly increase production in Venezuela, actually investing the money, bringing in the rigs,

hiring people, drilling, and shipping those barrels out. You're probably talking about really years and billions and billions of dollars of investment before you see meaningful ramp up in production in that country. Are there any other just... miracle solutions on the horizon? Not really. What you can hope for maybe is just a little,

you know, very small miracles. Benoit says those small miracles are things like if China decides to ramp up diesel production, or if refinery repairs are finished ahead of schedule. That could provide some relief, but again, this is not a tomorrow fix. American consumers aren't seeing prices skyrocket at the gas pump, yet. But where it's really going up is in the price for diesel. That's what powers the large

trucks that move most of our consumer goods from one end of the country to the other. That's for mostly shipping, you know, trucks. And so the question is, do we see some businesses cut down on deliverance, for instance? Or when do they actually, you know, pass through those costs to consumers? And if the price of diesel goes up, that's a higher cost that all kinds of businesses need to factor into their prices. After the break, how business owners are managing. Of all the things that are causing inflation to go up right now, how big of a deal are fuel prices for American companies?

For a lot of these U.S. companies, you know, fuel is the thing. That's our colleague Owen Tucker Smith. He's been hearing from businesses on how they're navigating the growing oil crisis. They're quite frustrated. I mean, now, you know, it's been many months of this, of a conflict that a lot of these businesses were hoping they could wait out for just a couple months, especially considering, you know, there's been all this messaging from the administration about fuel costs coming down tomorrow. And so a lot of these businesses are now kind of reaching, I think, a breaking point. Businesses essentially have two choices when field prices go up like this. The first choice is to hold the line, to wait it out.

and keep prices where they are. Owen spoke with one business owner that's taken this route, a farmer named Jim Barber. He's a third-generation farmer in rural Pennsylvania, and he has only, in the past five years, increased his beef prices around once. So he's very against price increases, even when he sees the cost that he pays swing up and down.

He really cares about his relationships with his customers, And so even though the cost that he's paying to get, for instance, hay trucked in from a few counties away is up, you know, 15, 20 percent, he's just going to eat that for now. How important is fuel to farmer like him? It's extremely important. You know, a lot of these farmers are, A, paying for fertilizer. B, they have high transport costs. They're shipping in hay. And C, they're often, you know, paying to ship their own things to their own things to their.

customers. So you might be paying energy costs, you know, three or more times. In Barbara's case, he believes the conflict in the Middle East will be resolved soon, and it's just a little bit longer before we're out of the woods and oil prices come down again. So he'll have a little bit less profit, you know, on the items that he sells, the milk, the pork, the beef. But, you know, the way he thinks about it is this is a thing that you do now so that customers continue working with you. And when this ends, you'll be rewarded for it for being the guy that stuck it out.

Can you talk generally about businesses that are deciding to keep their prices low and absorb these higher costs? What is the calculus that they're making generally? The calculus is often that they know how stretch consumers are, and especially middle-and-low-income consumers, they are trying to compete for a limited number of them,

and so they want to be the lowest price in the crowd. You especially hear this from companies like Walmart or Kroger or these big box retailers that are selling to the mass market. Whenever they can, they will advertise their rollbacks of prices. So the calculus here is, will it hurt your profit right now? It might, but it might also increase your sales. And maybe even increase your market share against companies that are raising prices. Absolutely.

But not all businesses are willing to eat the cost. The other approach is passing some or all of the higher prices onto their customers. One company that's doing this is called Ambix. It makes plastic components. They use resin, which is an important chemical compound that is very important for plastics. it's made from oil. And so when this kind of thing happens in oil prices skyrocket, the cost of resin goes up too.

And some of their costs were up 30, 40, 50 percent. And that's just not a thing that they could handle for too long. Ambik says it was resistant to raising prices at first. But as the war in Iran drag on, that started to change. So now, when their suppliers tell them we're hiking prices, 60 cents, that 60 cents is going to go to their customer. So you're starting to see, I think, some of these firms that for a while did want to keep prices stable, start to buckle a little bit, and start passing it along. Was there a moment when these businesses started to buckle?

I think for a lot of businesses, you know, there was this moment of optimism this summer, you know, when energy prices were starting to fall again. And they're almost, was a little bit of a feeling, like, maybe we're getting out of the woods. And then in August, tensions picked back up again, and the price of fuel picked up again. And, you know, we recently had $6 diesel. And I think that's when some of these businesses and economists started to realize, like,

these price shocks are starting to really embed themselves into the economy. With no end in sight for the conflict in Iran, all anyone can do is try and navigate. the uncertainty. We just got JPMorgan commodity analysts, like put out their latest forecast and they were saying, we don't even know how to model this anymore. Like there is no baseline because you can't see around the corner here. It's almost not worth predicting.

I think it's just a really sort of interesting moment for the economy right now. It is healthy on paper on a lot of levels and yet consumers feel so bad about the prices that are paying. And I think, you know, for businesses, the question is, you know, how long is this going to last? And it's not really clear to the oil executives or the politicians or the CEOs right now. That's all for today. Monday, September 21st. The journal is a co-production of Spotify and the Wall Street Journal. Additional reporting in this episode by Colin Eaton. Thanks for listening. See you Bro.