There are two oil prices. Brent is the price paid for oil transported by sea, i.e., by Asia and Europe. WTI is the price of America's own oil; American gasoline comes from there. The difference shows who bears the cost when the Strait of Hormuz is closed: if the difference is large, the loss is borne by those outside the country; if the difference closes, America also pays the world price.
Figures (EIA daily spot):
April: difference $25.9 (Brent $122, WTI $96). The Strait was closed, the bill was borne by Asia and Europe; America was buying its own oil $26 cheaper than the world price.
June: the difference dropped below zero, WTI became more expensive than Brent. While the world price fell to $72, the American price remained above it.
September 1: The Strait is still partially closed (4 ships passed on Tuesday; 130 per day before the war), Brent is $96, difference $4.54. Pre-war level. In April, Brent was $122 while America was paying $96; Today, while Brent is at $96, they're paying $91.50. The bill is back home.
Venezuela isn't solving this. Exports rose to 1.1 million barrels a day in April, with 43% going to America; the gap still closed. Venezuelan oil is heavy, it feeds the refinery, it doesn't replace the light oil that fuels gasoline pricing. The century-long agreement signed on August 28th (17 fields, 35% share, 20% of production at cost, up to $100 billion investment) is years of work; it won't change the current gap.
That same week, the Bosphorus was hit again. When the gap was $26, keeping the Bosphorus closed wasn't costing Washington dearly; now it's $4.5. There are two months until the midterm elections.
Interest rate connection: when the gap was wide, oil was entering the US long-term interest rate market through a single gateway: Japan's energy bill and the yen via Brent. When the gap closed, a second gateway opened: American gasoline and inflation expectations via WTI.
What would disprove me is: if the difference rises above $8 again while Brent is above 95 and stays there. If that happens, I'll write about it.
