US Energy System Helps Cushion Global Supply Shock from Hormuz

The recent closure of the Strait of Hormuz has caused a shock to global oil and LNG supply, but the US energy system has helped mitigate this disruption. According to the American Petroleum Institute (API), record American crude oil production and huge natural gas production have been decades in the making, resulting from billions of dollars invested every year in increasing oil, natural gas, and fuel supply.

The API notes that while these investments have changed America's role in global energy markets, they also come at a cost. US inventories of crude oil and petroleum products are now below the five-year average for this time of year, leaving narrow margins of error in production, refining, and export systems.

Despite market hopes for a resolution to the Iran war, prices remain tight, and uncertainty persists around key shipping lanes. However, the US energy system has helped cushion what could have been a much more severe shock, keeping crude oil prices relatively stable for most of the past five months.