Before Trump launched his Republican-enabled war with Iran, cargo ships could move freely through the Strait of Hormuz without paying massive tolls or fees. Today, that is no longer the case. Still, energy markets did not react as strongly or negatively to that development as you might have expected, largely because the attitude in those markets was that we would see a quick resolution of hostilities. However, those attitudes are beginning to change, with energy market analyst firm Rapidan Energy Group releasing a statement that basically says, “Never mind the ‘quick return to the status quo’ talk.”
Not that Rapidan expects the strait to remain closed any longer than previously predicted. As it said in its statement, “The Hormuz disruption will be more profound and persistent than we previously expected, materially upsetting the global oil balance by 2027.” However, it’s not so bad, right? January 1, 2027 is not far away. Obviously the mid-term has passed, but we can extend it by another five or six months. Except, once you read the first line, it becomes clear that “through 2027” actually means “through all of 2027.”
According to Rapidan, “It can no longer envisage a return in the near term to freedom of navigation through the Strait of Hormuz.” In light of the Republican failure to negotiate a permanent peace deal during the temporary ceasefire agreement and a return to open war, analysts say “ongoing military risks are expected to disrupt the transit of ships through the strait into next year, keeping Arab Gulf production below pre-conflict levels through 4Q27.” That’s a year more than their previous prediction, and probably not such good news for anyone frustrated with high gas prices. Maybe try again in 2028?
Crude oil prices rise
Rapidan concluded its statement by saying it planned to update its global inventory forecasts in the upcoming July oil market report, telling investors that “crude oil balances now show inventory draws through year-end, which is bullish for crude prices.” So at least wealthy businessmen won’t have to worry about being forced to sell a piece of their business to afford their children’s boarding school tuition. It’s one thing for common people to struggle to put gas in their cars, but inconveniencing rich people would be a step too far.
Speaking about the future, Rapidan CEO Bob McNally recently retweeted a clip from an interview in March, where he essentially outlined three possible scenarios for a third Gulf War. With a ceasefire no longer an option, McNally said expect the US (and any allies that decide to join us) to focus efforts on “reducing Iran’s ability to disrupt traffic” through the strait and “reducing attacks to a reasonable level” so that troops can allow ships to transit. If the US is unable to achieve this, “oil prices will continue to rise until we discover new levels that could induce an economic recession.”
At the time, McNally did not say how expensive he thought oil would become, but he did say, “However, this is well above the old highs,” adding that if the previous record for oil prices was $147 a barrel, he saw prices climbing into the $200 range. If that were the case, experts had already predicted Average gas prices in the US are expected to be between $6.50 and $7.00 per gallon.
Although it currently doesn’t cost $140 to fill a 20-gallon tank, gas has gone above $4 a gallon nationally and diesel has gone above $5 for the second time this year. that’s something GasBuddy’s Patrick de Haan tells This has never happened before in the US, gas prices were high even after Russia invaded Ukraine in 2022, but we have never seen gas cross $4 a gallon, fall back into the $3 range and then climb above $4 again in the same calendar year. If that’s not winning, I don’t know what is.
