Strait of Hormuz shipping grinds to halt

Now, it's important to note, Matt, that the US doesn't rely on the Strait of Hormuz for its oil. But yet we almost immediately saw a change with the price at the pump. And now President Trump is offering to escort ships through the passage. Why is the Strait of Hormuz a priority for the US? Yeah, sure. So we bring in a little bit of oil, so maybe half a million barrels a day. In the grand scheme of things, that isn't a massive amount of that 15 million we see passing through there. But your price at the pump at your local gas station there is mostly influenced by the oil price, and the oil price is influenced by global factors. So as we're seeing oil prices on a global basis here, rallying like crazy, that is being reflected through quickly to prices at the pump. So we've seen them jump 7% in the last day or so. And that will continue to increase. It plays catch up a little bit. And so even though the US is very much insulated from a supply perspective because we refine our own oil, we produce our own gasoline, we have our own natural gas, et cetera, we are not insulated from the pricing.

Now a blockade, though, of the strait was really hitting Asian countries much harder. The US Energy Information Administration says more than 80% of all oil and gas shipments through the strait go to Asian nations. China, India, Japan, and South Korea are the largest buyers. China, as we know, is an ally of Iran, and they get about half of their crude oil imports through that Strait of Hormuz. Are they concerned about ships not being able to pass through? They have to be. Absolutely, yeah. So you mentioned they get half of their crude from the Middle East there. That's about 5 million barrels a day there. And so China is insulated in the perspective that they have a lot of inventory. So they have 1.2 billion barrels of inventories. But by all means, the lack of this supply even just for a few days is going to have an impact, let alone if it goes on for a number of weeks. Same thing with Iran. We're hearing that Iran may be trying to close the strait there. It's going to fire missiles at tankers. But all of Iran's crude basically passes through the Strait of Hormuz. All of that goes to China as well. So those barrels not flowing means that Iran is not getting revenue either. And the other thing to bear in mind, too, is that you could say, well, this for the US is a sideswipe at China because if the Strait is closed, then it's hurting them. But at the same time, if you just think about oil as one big bucket of supply, cutting off those flows is just going to increase the price of oil. And that's the last thing that President Trump wants when he wants prices at the pump to be lower. And so that's why he is pushing for these insurance waivers or coverage and for this convoy for the Strait of Hormuz there.

Matt, is there a potential for the Middle East shutting off oil production altogether if these tankers are not able to get through the Strait of Hormuz? Maybe not altogether. Liz, we're already starting to see some countries shutting in, so the likes of Iraq. And the situation is they are massive producers of these commodities, massive exporters of oil, and yet they don't have a lot of storage because they just simply send this all out. And you've got a situation now where that crude is just building up and building up on tankers within the Mideast Gulf there. And you're not able to get empty tankers in to load up either. So the situation we're getting to in the coming days here is these producers likely having to dial back their production, shutting their oil fields because there's nowhere else for this oil to go.

Thank you so much. Always good to talk to you.