US Is Oil Supplier of Last Resort as Hormuz Disruptions Worsen

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One striking example is Japan. Before the war, the nation bought around 90% of its crude and fuel supply from the Middle East, along with only minimal volumes of American oil. Now the country is among those first out of the gate to snap up US supply. Sales of supplies that will be loaded in June, and which will arrive in August or thereabouts, began just days ago and Japanese refiners collectively have already bought at least 8 million barrels of US crude, said traders familiar with the matter.

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In Singapore, a regional commodity trading hub, refiners have also swung to purchasing more US crude. And demand from South Korea — long the world’s second-biggest buyer of US crude — remains strong.

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To be sure, Japan and South Korea have crude stockpiles of their own to help provide a buffer. Limited crude flows from the United Arab Emirates and Oman are also still taking place. Questions remain, however, over how long such supplies can last — especially with little publicly known about the national storage levels. And other exporters, such as Brazil, don’t typically ship the crude grades that these Asian nations need most.

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The transformation of the US from a net importer of oil to a major global supplier is relatively new. 

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The shift was sparked by the shale revolution of the early 2000s, when horizontal drilling and hydraulic fracturing from Texas to North Dakota swiftly boosted domestic production. In 2015, the US lifted a ban that prohibited most oil exports, which was imposed in the wake of the 1970s Arab oil embargo. By 2019, booming shale production made the country a net exporter of crude and fuels. 

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Analysts say America’s emergence as an energy juggernaut underpins its ability to take increasingly bold foreign policy steps. This year alone, the US ousted Venezuela’s long-time leader, enforced sanctions on two of Russia’s biggest oil companies and, along with Israel, started the war in Iran — all moves that threatened global crude balances.

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Trump — a relentless champion of what he calls America’s “energy dominance” — has repeatedly boasted about the ability of the US to help fill the massive crude supply gap created by the war in Iran. 

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“We have more oil production right now than any time in history,” Trump said to reporters on Friday. “And if you take a look at the ships, they’re all coming up to Texas, Louisiana, Alaska.”

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Presidents going back to Jimmy Carter in the 1970s have worried about fuel supplies, with the concern influencing foreign policy. Trump, emboldened by the world’s largest oil-producing economy, could worry less about domestic shortages than his predecessors.

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Still, as US oil output grew, even the Obama administration was citing domestic supply as an assurance in trying to rally global support behind the Iran nuclear deal known as the Joint Comprehensive Plan of Action.

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“The US becoming a net exporter of petroleum — a net exporter of energy — changed everything about our foreign policy in areas where energy is a factor,” said Kevin Book, managing director at ClearView Energy Partners, a Washington-based consulting firm. “Since energy is a factor in almost everything, it basically changed our foreign policy.”

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But America’s energy dominance is now testing its upper limits.

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Oil production is down about 100,000 barrels a day since the Iran war began. Drillers have so far mainly been hesitant to increase production, even as oil prices spiked, because it’s hard to predict where markets are headed next.