{"text":[[{"start":5.35,"text":"The writer is managing partner at TWG Global and was a senior adviser to former president Joe Biden"}],[{"start":12.2,"text":"In June 2022, I was serving as the White House’s senior energy adviser when the national average for gasoline prices crossed $5.02 per gallon for the first time in American history. I know precisely what that number does to an administration: the calls, the scramble, the acute political anxiety that descends when a price that every American sees crosses a threshold that feels symbolic as much as economic."}],[{"start":37.599999999999994,"text":"That moment is coming again. And, by coincidence, it is arriving at the same point in the political calendar — in June of a midterm election year. This time, however, the toolkit that worked before is largely spent."}],[{"start":50.949999999999996,"text":"The crisis that took place in 2022 was something that happened to us. Russia’s invasion of Ukraine was an external shock, entirely outside American control. Gasoline prices remained elevated from March through to August, a four-month ordeal with $5.03 as its apex. What lowered prices was the release of 180mn barrels of oil from the Strategic Petroleum Reserve, a production response from domestic drillers, and critically, the unwinding of the fear premium once markets stabilised. By late August, the national average price had fallen back below $4. "}],[{"start":88.9,"text":"This time, it is the administration that has made the decision to launch military operations against Iran. Whatever the strategic rationale, the economic consequences were not unforeseeable. What is increasingly clear is that they were not adequately planned for before the first strike was launched."}],[{"start":105.45,"text":"The national average gasoline price has now surpassed $4.50 per gallon. Two simultaneous crises are compounding in ways we did not experience four years ago."}],[{"start":115.05,"text":"The first is physical disruption. The closure of the Strait of Hormuz has removed more than 12mn barrels per day from the global supply. The IEA has called this the greatest global energy security challenge in history. This is not hyperbole."}],[{"start":128.55,"text":"The second is the refinery conundrum. Jet fuel crack spreads — the difference in price between jet fuel and crude oil — have reached a record $80 per barrel, well above the $60 peak in 2022. Because a barrel of crude oil yields only three to four gallons of jet fuel versus 19 to 20 gallons of gasoline, that extraordinary margin is pulling refinery capacity towards aviation fuel. The result defies normal market logic: gasoline production has declined by approximately 340,000 barrels per day compared with a year ago, even as prices rise and refineries run near full capacity. "}],[{"start":168.25,"text":"According to the Energy Information Administration, US motor gasoline stocks have been drawn at approximately 4mn barrels per week in recent weeks, with the deficit to the five-year average now nearly 11mn barrels. The all-time record low, not seen since the EIA began tracking in 1990, could be reached as early as mid to late June."}],[{"start":189.4,"text":"The tools that worked in 2022 have already been deployed. The US committed to releasing 172mn barrels from the reserve as part of the International Energy Agency’s co-ordinated response. It has already released approximately 80mn barrels, leaving stocks at approximately 374mn barrels. With refineries skewed towards jet fuel, additional crude releases will not translate into more gasoline with the same efficiency they once did. The reserve is not just smaller. It is a blunter instrument."}],[{"start":223.15,"text":"The production response has also already occurred. US crude and petroleum product exports reached a record 12.9mn barrels per day in late April, with daily oil product exports hitting an all-time high of 8.2mn barrels in May. There is no incremental surge waiting. That lever has been pulled. "}],[{"start":241.85,"text":"Last week’s inflation numbers signal that consumer energy prices are running hotter and longer than the Federal Reserve had assumed. What they do not capture is what comes next. Energy prices feed into the core consumer price index with a lag of several weeks. The pump pain of May will translate into inflation figures in July and August. The 30-year Treasury yield has risen to the highest level since the financial crisis and the 10-year Treasury yield is already rising. Mortgage costs, corporate borrowing rates and the cost of financing national debt all move with it."}],[{"start":276.5,"text":"A ceasefire is already in place in Iran. Yet the strait remains closed. Only a resolution of the underlying conflict will change the situation driving every economic variable outlined above."}],[{"start":289.2,"text":"In the US, the $5 per gallon price threshold is days away. What follows, and for how long, depends almost entirely on whether this administration is prepared to pursue a political resolution with Iran on nuclear, missile and security arrangements before the economic arithmetic falls off a cliff. "}],[{"start":307.7,"text":"There is one solution to all this. It is not military. It is diplomatic. And the clock is running."}],[{"start":318.99999999999994,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779327204_2610.mp3"}