PodcastDavid Lin ReportJosh Young

Oil Reserves Dangerously Low; ‘Much Higher’ Fuel Prices By Winter | Josh Young

Josh Young describes a strained fuel market, with low diesel inventories, disrupted supply, and U.S. Strategic Petroleum Reserve stocks at their lowest level since 1982. He argues that high tanker fees and refined-product prices sustain incentives to move oil through the Strait of Hormuz, even as reported flow surges may not signal a lasting recovery. He expects refining activity and inventory trends to shape prices, while warning that lower SPR releases and unusually high Q4 refining activity could put further upward pressure on crude.

OilEnergy MarketsGeopolitical Risk

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Key Takeaways

Young attributes elevated refined-product prices to U.S. refinery shutdowns, Ukrainian attacks on Russian refineries, and China’s temporary reduction in refined-product exports. With U.S. and Canadian refiners deferring maintenance and running above typical seasonal levels while diesel inventories are very low, he argues refiners are already doing what they can to rebuild stocks.

Young argues that reported surges in Strait of Hormuz flows were brief convoys and transfers, not a sustained return to pre-war export levels; he says WTI would likely be around $70 if high flows had persisted. He also says high tanker rates and fees of about $30 per barrel, alongside refined products selling for two to three times crude’s value, keep the financial incentive to ship strong despite the risk.

Young says that suspending or eliminating fuel taxes would lower pump prices more directly than asking refiners to do more, noting that some U.S. state gasoline taxes exceed $1 per gallon and Canadian taxes may be higher. His case for direct tax relief accompanies his argument that refiners are already running above typical seasonal levels and deferring maintenance.

GEO-POLITICS

Tanker Attack Risks — Josh Young says roughly 5% of tankers that transited the area were hit, leaving many disabled or causing crew injuries or deaths. He warns that delayed reports and claims that tanker traffic was safe may have exposed crews to greater danger. He also says claims of elevated flows can prompt the IRGC to attack more tankers.

“And maybe more people were hurt or died because there was this bad information that was getting reported about it supposedly being safe and all these tankers getting through unharmed…”—

ECONOMY

Fuel Tax Relief — Young argues that suspending or eliminating gasoline and diesel taxes would lower pump prices more directly than asking refiners to do more. He says some U.S. states have gasoline taxes above $1 per gallon, and Canadian taxes may be higher.

“There's in some in some states in the US over a dollar a gallon tax on gasoline and in Canada I think it might be even more than that whether…”—

MARKETS

Fuel Price Strain — WTI was just below $90 per barrel, down from $100 a few weeks earlier, while U.S. diesel averaged $6.32 per gallon. Young puts refined-product prices at roughly a $250-per-barrel equivalent. He says such extreme prices signal urgent fuel needs and economic damage from unavailability.

“WTI crude is now trading just below $90 a barrel today, having fallen from $100 just a few weeks ago.”—

Hormuz Flow Disruptions — Josh Young argues that reported surges in Strait of Hormuz oil flows reflect brief tanker convoys and transfers, not a sustained return to pre-war export levels. Flows were substantially reduced for most of the period, with only one or two weeks near pre-war levels. He says WTI would likely be around $70 if high flows had persisted, and characterizes some high-flow reporting as potentially propagandistic.

“And so the story they're picking up on is that on individual days and sometimes a couple of days together, there are these convoys of tankers that the US Navy…”—

Tanker Shipping Economics — Young says the financial incentive to ship oil through the Strait of Hormuz remains strong, citing very high tanker rates and fees of about $30 per barrel. Refined-product exports have also increased. Diesel, gasoline, and jet fuel can sell for two to three times the value of crude, making the added tanker risk financially worthwhile.

“But that's probably what's happening…”—

FORECASTS

Inventory Outlook — Young says that if current conditions continue and other factors do not worsen, U.S. refiners could rebuild gasoline and diesel inventories as crude inventories fall. That could ease refined-product prices while putting upward pressure on crude. Separately, he warns that sustained cuts in SPR releases—from 7–9 million barrels weekly about three months earlier to less than half a million barrels in each of the last two weeks—could further reduce commercial crude inventories and push prices higher.

“Excluding Ukraine, excluding some of these other factors, but to the extent those don't get worse, you should see incremental changes positive for inventory for diesel and gasoline, higher levels…”—

Crack Spread Outlook — Young explains that the 3:2:1 crack spread represents one barrel of crude yielding roughly two-thirds of a barrel of gasoline and one-third of a barrel of diesel. He says the forward market is pricing in a material decline in refining margins, consistent with higher crude prices and lower gasoline and diesel prices.

“Like what I'm describing is literally the crack spread is you turn crude oil into gasoline and diesel and then some other stuff and but the simple calculation is one…”—

Crude Positioning — Young says speculative positioning in crude futures is exceptionally low relative to WTI. He argues that such pessimistic sentiment has historically preceded higher, rather than lower, oil prices. He cites prediction-market odds of a 32% chance that WTI will be above $115 by year-end, a risk he says is not reflected in the forward curve.

“Net speculative positioning for crude oil futures, basically people who don't aren't active in the business and are managing money or gambling on it…”—

Oil & Diesel Crisis

The host notes that crude and diesel prices have eased despite continued Strait of Hormuz disruption, while U.S. diesel remains costly and the SPR is reported at its lowest level since 1982.

Hormuz Tanker Traffic

Young says reports of near-normal tanker flows capture brief, protected convoys rather than sustained shipping, and that high fees and insurance support continued transit despite attacks and danger to crews.

Tracking Oil Flows

Young recommends comparing open-source Hormuz trackers with paid research, says sustained crude flows remain well below prewar levels, and explains that high refined-product prices incentivize some exports.

Diesel Reserve Release

Young says releases of refined products directly ease severe diesel shortages, which reflect refinery disruptions and reduced Chinese exports; he notes that SPR crude releases do not solve the product shortage.

Refinery Crunch

U.S. and Canadian refiners are already running unusually hard after deferring maintenance, but Young says low inventories require continued high runs; lowering fuel taxes would be a more direct way to cut pump prices.

U.S. Oil Reserves

Young calls the SPR’s historically low stock concerning and expects continued Hormuz disruption to draw down crude inventories while counterseasonal refining rebuilds diesel and gasoline stocks.

Refining Margins

Young explains that the crack spread measures the margin from turning crude into products, and says forward markets anticipate lower refining margins as product scarcity eases.

Oil Price Outlook

Young sees pessimistic crude positioning as a potential setup for higher prices, noting that traders assign meaningful odds to WTI above $115 even though crude futures do not reflect that outcome.

Winter Energy Risk

Young expects high Q4 refinery runs and winter-oriented production to support product inventories, while potentially raising crude prices and compressing currently extreme refining margins.

Iran War Outlook

Young gives little weight to the president’s assurances that the Iran war will end soon, but says European pressure could reduce Ukrainian attacks on Russian refineries and help restore product supply.

What Could Change

Young is watching Houthi control near the Red Sea and, especially, whether Ukraine shifts attacks from Russian refineries to crude-export infrastructure, with refinery recovery potentially easing diesel prices.

Oil’s Next Trigger

Young identifies unusually high Q4 refining activity and falling crude inventories as possible triggers for much higher oil prices, while noting that fungible products make sanctions and supply origins difficult to track.

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Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

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