It won’t be anything on the scale of 1973, when President Nixon imposed year round daylight saving time to reduce electricity consumption as well as a 50mph highway speed limit. Nor are we likely to see the thermostat restrictions, or the standby plans for rationing, that were introduced by President Carter in 1979.
The “oil shocks” of the 1970s were not just from a different era, they were of a different magnitude as well.
Trump may well step in with some form of oil export controls
Yet that does not mean that the American economy is immune to another crisis, nor that we won’t see a dramatic response from the White House – because, in reality, the US could easily run out of oil later this year.
Rewind only a few weeks, and the market appeared to have decided that the oil crisis was over. After the United States and Israel launched their attack on Iran, the price of Brent Crude, the industry benchmark, spiked up to close on $120 a barrel, doubling in the space of just a few days. There were plenty of alarming predictions of $200 or even $250 a barrel if the war dragged on, and if the Strait of Hormuz, the crucial supply route for Middle Eastern oil, was closed to tanker traffic. In the end it didn’t happen. Oil traded in triple digits for a few weeks, and then as a shaky truce was agreed, drifted back down to around $70, a price that the global economy can live with.
But that is far from the whole story. Sure, in the medium-term there is no real issue. There is plenty of oil in the world, and more is coming on stream all the time. Mainly thanks to fracking, America is now both the world’s largest producer and exporter of oil, and countries from Mexico to Argentina, are rapidly developing their own shale reserves. With regime change, Venezuela, with the largest oil reserves in the world, will soon be flooding the market with extra production. And of course, alternative, climate-friendly energy sources such as wind, solar, and nuclear, are growing all the time, with renewables accounting for 47 percent of electricity generation across the EU, and for 26 percent in the US.
Even so, for the rest of this year, and perhaps for longer, the oil market will remain very volatile. With the truce with Iran breaking down, the price spiked again at the start of this week, and it may start to climb back towards triple digits if the conflict intensifies. The flashpoint, however, is not so much the price, as the actual availability of oil itself. Stockpiles are still hovering at close to their lowest levels in a year, and the storage hub at Cushing, Oklahoma, known to energy traders as the “pipeline crossroads of the world,” is close to its operational limit. That is a sign that the market is no longer running smoothly.
Likewise, the Strategic Petroleum Reserve, which was designed to protect the United States from energy shocks by keeping enough oil in storage to deal with any emergencies, has been drawn down for years and there are few signs that it will be replenished in any meaningful way. Add the two together, and one point is clear. America is more vulnerable to a genuine external shock than it has been since the 1970s.
Meanwhile, the geopolitical backdrop is worsening. The truce with Iran has collapsed, and it will be harder for President Trump to negotiate a second ceasefire, even if he wants to, without looking hopelessly weak. Tanker traffic through the Strait of Hormuz has stopped all over again. Ukrainian drone strikes are taking out refining capacity in Russia, and even if much of that was sanctioned, unofficially everyone in the industry knows a lot of it was finding its way onto the global market. Demand from China was suppressed in the spring, but it could well bounce back.
Over 2026, global oil demand has fallen back to levels now seen since the Covid crisis, according to IEA data, but no one can count on that lasting. It may bounce back over the next few months. And yet the entire cushion that would normally absorb a shock, such as high inventories, a full Cushing hub, and a well-stocked SPR, has been steadily whittled away over the last two years. America is running out of reserves.
The real “energy shock” may well be one that no one expects right now. Over the last decade, America has become the world’s dominant energy exporter, shipping both crude and refined products abroad at a steadily rising rate, while simultaneously allowing its own strategic buffers to run down. And yet, the harsh reality is this. You can’t be both the world’s “swing supplier” and a nation with minimal spare stockpiles at the same time. Eventually, you have to choose one or the other. It will only take a brief spike in prices, and a supply crunch, for that to become painfully obvious.
At some point, Donald Trump will have to make a tough choice. A President who has always promised energy security is not going to sit idly by while a supply squeeze pushes prices at the pump back toward the levels that will destroy his approval ratings, especially with mid-term elections looming. As the man responsible for the war, and who regularly describes “tariffs” as his favorite word, he may well step in with some form of export controls. The mechanism is not hard to imagine. Export restrictions, or some form of “reverse tariff” will be dressed up as “keeping American fuel for American drivers.”
The US will be protected. But the rest of the world has become hooked on American oil, and may face shortages, blackouts and even rationing. As Presidents Nixon and Carter discovered half a century ago, once the oil industry is plunged into a crisis events can quickly spiral out of control. The US may well be heading for another oil shock this year – and it will be every bit as unpredictable as the 1970s.
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