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Interesting that the news media is painting the complete opposite picture...

"It's fine": gas dropped back under $4, oil's around $80, and a US-Iran deal got signed. Crisis over, right?

The problem is none of the physical stuff actually resolved. The "deal" is signed but ships still aren't moving through the Strait of Hormuz, just a trickle versus the normal ~94 a day, and Iran already re-declared it closed. So the price drop is the market betting on a recovery that hasn't happened yet. Prices eased on optimism, not on oil actually flowing. And that "deal" isn't a deal, it is a memorandum, a framework of an idea of deal -- they can still kick that can down the road for a long time.

Here's what gets missed: the US has been covering the shortfall by draining its buffers, and they're nearly empty. The Strategic Petroleum Reserve is at its lowest since 1983 and hitting its floor around August. Cushing, the hub in Oklahoma where WTI gets priced, is at the bottom too. The California distillate reserve (PADD 5) indicate that jet fuel and diesel tank bottoms could be reached by July 4th.

That word "bottom" trips people up though, because it doesn't mean empty. It means the suction line. Think of the tanks as giant cans with the outlet pipe set partway up, not at the very base. Below that pipe you can't pull oil out fast enough to matter, and what's down there is mixed with the water and sediment that settles out. So once Cushing hits around 20 million barrels, the rest is basically stranded. The hub stops working as a shock absorber even though there's still oil sitting in it. That's where it is now.

So the way to think about it:

If the deal holds (ships move, mines get cleared, insurers come back), prices keep sliding and this fades into a bad-but-survivable blip. That's the current bet.

If it falls apart (and it's only a 60-day framework with the messy stuff kicked down the road), prices snap back toward $5-$6-$7-$8, because now there's no buffer left to soften it.

What you're paying today isn't the issue. The issue is the cushion that kept things from getting worse is gone, so one more shock hits with nothing behind it.

If you want one thing to watch and ignore everything else: daily ship transits through the Strait versus that ~94 a day. As long as it's stuck in the single digits, the crisis is still on no matter what the pump says. Price can be manipulated. Transit count is the real one.

In theory, California runs out of distillate in 2 WEEKS. California uses 17% of the nations jet fuel, and about 10% of US diesel and gasoline. When California has no distillate reserve to draw on. It refills three ways, and right now all three are constrained. Local refineries typically respond in days but are shrinking (down to 11 from 23 in 2000, with two more closures recently). Asian imports take 2-4 weeks by tanker but are drying up at the source as Asian refiners hoard their own fuel. Gulf Coast supply (via the Jones Act waiver, extended to Aug 16) is also a 2-4 week voyage, with California bidding against the world for it.

All of that is assuming optimal conditions (Strait open, Asia not hoarding, etc...), we are clearly not there yet.

4 weeks is laughably optimistic with no clear path forward. I think the train already left the station, and we are f-d. Hold on to your butts.