The US has stepped in to shield the global economy from the oil crunch triggered by the Iran war by boosting exports, selectively easing sanctions and tapping strategic reserves. The conflict may be denting Washington’s standing in some quarters, but it is also cementing its transformation into the world’s dominant energy superpower.
Unlike in previous oil crises, the Organisation of the Petroleum Exporting Countries has been left largely powerless.
The near-hermetic closure of the Strait of Hormuz trapped 13 per cent of global oil supplies in the Persian Gulf and forced gulf producers to shut in around nine million barrels per day of output, stripping the group of its most potent lever: spare production capacity.
Saudi Arabia, the world’s top crude exporter and OPEC’s de facto leader, has maximised exports through its alternative pipeline route bypassing Hormuz via the Red Sea. But even that has been insufficient to offset the scale of the disruption.
Enter the United States. With the world’s largest oil industry – surpassing Saudi Arabia and Russia in production in 2018 – and the currency underpinning the global trading system, the US has extraordinary leverage over energy markets. This power is comparable, in some respects, to OPEC’s historic ability to recalibrate output in response to shifts in global supply and demand. And Washington hasn’t been shy about using it.
US oil exports have soared in recent weeks, helping to temper the acute energy supply shock emanating from the Middle East, including the refined product squeeze.
Total US oil exports earlier this month hit an all-time high of 12.9 million bpd, of which refined products accounted for over 60 per cent, according to Energy Information Administration data.
Seaborne US oil exports are set to climb to a record 9.6 million bpd in April, with flows to Asia nearly doubling from pre-war levels to 2.5 million bpd, according to data analytics firm Kpler.
This surge has helped cushion Asian economies - among the most exposed to gulf supply losses - from even sharper price spikes.
For US producers, the Iran war has delivered a sizeable windfall. The value of crude and refined product exports has increased by around $32 billion compared with pre-war prices, according to ROI calculations, boosting both corporate earnings and tax receipts.
American oil firepower does not end with production. Washington agreed in March to release 172 million barrels from its Strategic Petroleum Reserve in several tranches through 2027 as part of a coordinated global emergency drawdown of 400 million barrels.
The SPR stood at around 405 million barrels by April 17, down from 415 million barrels at the start of the war - meaning the buffer against further supply shortages remains ample.
Washington has yet another tool to influence global energy supplies: economic sanctions. Since March, the US has selectively loosened restrictions on purchases of Russian and Iranian oil. The Trump administration on April 17 renewed a waiver allowing countries to buy sanctioned Russian oil at sea for about a month.
The impact has been swift. Volumes of Russian oil stored on tankers fell from a record high of more than 13 million barrels at the end of January to just 2.9 million barrels by April 24, as buyers swarmed back in. By bolstering Moscow and Tehran's revenues - even temporarily - these measures are arguably undermining broader US foreign policy goals.
The US administration has recently backtracked on part of this strategy. It did not renew a separate 30-day waiver issued on March 20 that allowed purchases of around 140 million barrels of Iranian oil held at sea and simultaneously imposed its own Hormuz blockade to squeeze Tehran’s revenues.
Sanctions will always involve a delicate balance between exacting pressure and limiting collateral damage to the global energy system. But the US is still the one calling the shots.
Taken together, these measures show how the US has emerged as a de facto "swing supplier" - and what Uncle Sam giveth, he can also taketh away.
US President Donald Trump could, in theory, impose restrictions or outright bans on some US energy exports to cool rising domestic fuel prices - an especially sensitive political issue ahead of the midterm elections in November.
Such a move would almost certainly send international energy prices sharply higher. An export ban remains unlikely, however. It would risk severe disruption to US oil production and refining systems that are structurally geared toward exporting surplus volumes.
It would also strain relations with allies in Asia, Europe and Latin America who are relying heavily on the US to replace lost Middle Eastern barrels and could prompt retaliatory measures.
The US's powers certainly are not unlimited. Unlike OPEC – or its wider producer alliance including Russia known as OPEC+ – the US energy industry remains largely bound by market economics.
Washington cannot instruct companies to raise or cut output at will, nor can it marshal spare production capacity as gulf producers traditionally have. In that sense, the US cannot fully replicate OPEC’s role as a manager of global supply.
What it can do is respond - fast, and at scale. Through a combination of public policy and private market forces, Washington has eased at least some of the pain for consumers and revealed a level of market influence unmatched since OPEC's heyday.
(Reporting by Ron Bousso; Editing by Marguerita Choy)
