Daily on Energy: Oil surges above $100

HOSTILITIES IN THE MIDDLE EAST WORSEN:

The U.S. and Iran are facing another military escalation at sea. 

The U.S. Central Command said Tuesday night that it destroyed five Iranian oil tankers in response to recent attempts to hit a U.S. Navy warship. The U.S. hit four Iranian crude ships in the Gulf of Oman and one near Kharg Island. 

CENTCOM alleged the ships were part of Iran’s shadow fleet, which is used to export oil and generate revenue. 

The two countries have been trading strikes since last week. The U.S. military last weekend hit three Iranian oil tankers in retaliation for an earlier attack against Navy ships. One of the Iranian oil tankers was hit near Kharg Island. 

President Donald Trump told reporters at Joint Base Andrews today that he believes the war in Iran will end “immediately” after the midterm elections. 

Strait of Hormuz traffic: There is uncertainty surrounding how much oil has been flowing through the Strait of Hormuz. 

The ship-tracking firm Kpler said that around 6 million barrels of oil crossed the waterway on Aug. 31. It estimated an average of around 4.3 million barrels per day transited in August, and noted that transits have fallen sharply in recent days. 

In case you forgot, Energy Secretary Chris Wright claimed last week that roughly 17 million barrels of oil and gas products passed through the strait on Aug. 31, the most since the war began. Over the weekend, Wright told CNN that daily averages were over 9 million barrels per day, far higher than the 4-6 million barrel estimates made by market analysts. 

With the new hostilities, there is a very good chance that traffic could drop once again. 

OIL PASSES $100 ONCE AGAIN: 

In the wake of the new strikes, international benchmark Brent crude soared above the $100 line for the first time since late July.

Just after 2 p.m. EDT, Brent had risen by 3.01% and was trading at around $100.87 per barrel. Earlier in the afternoon, Brent peaked at just over $101 a barrel. West Texas Intermediate, the U.S. benchmark, was following closely behind and had risen by 2.97% to sell at $95.79 a barrel. 

Market analysts have been wary of predicting whether WTI will also rise above $100 a barrel, with XS.com’s Simon-Peter Massabni writing this week that traders are pricing in the fact that oil does continue to flow through the Strait of Hormuz as well as alternative routes. 

“A sustained move above $100 would require the current geopolitical threats to translate into an actual and prolonged disruption to global oil exports,” Massabni said. 

The higher oil premiums will likely push prices at the pump even higher. 

As of today, the national average price for gasoline reached $4.22 a gallon, up by more than $0.05 from yesterday and well over $1.00 from a year ago. Pricing estimates from GasBuddy recorded a more than $0.09 one-day increase, the largest since late April. 

Drivers saw record prices at the pump over Labor Day, with the previous high recorded by AAA being $3.82 a gallon in September 2012. 

The national average of diesel prices is also inching closer to $6 per gallon, a price mark that has never been seen before. As of this afternoon, the national average of diesel prices is at $5.94, according to AAA. 

GasBuddy’s Patrick De Haan has warned it is only a matter of time before drivers see $6 diesel on average.

“Diesel history is about to be made,” he wrote in a post to X. “$6/gal nationally — never seen before, days away, it’s now in the pipeline, unavoidable.”

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All the rest:

ELECTRICITY GENERATION TO HIT RECORD LEVELS THIS YEAR: The Energy Information Administration is forecasting that U.S. electricity generation will hit record levels over the next two years. 

In its September Short-Term Energy Outlook report released today, the EIA said it expects electricity generation in the U.S. to grow 2.2% to a high of 4,368 billion kilowatt-hours in 2026. Generation is forecast to grow by another 1.7% next year. 

The agency said much of the new generation is driven by “data center development” and increased manufacturing in the commercial and industrial sectors. 

New demand is particularly growing in the West South Central region, even despite the moratorium on data center development in Texas, the EIA said. 

DOE AWARDS MILLIONS FOR MINING TECHNOLOGY: The Department of Energy will award $73 million in funding to four projects to help accelerate mining technologies. 

The four projects selected include Innovative Wireless Technologies Inc. and the University of Arizona, which will separately create a national testbed for the development and deployment of advanced mining technologies. 

The agency also picked the Curators of the University of Missouri, which will create a multifunctional mining technology that combines two facilities for underground technology testing and advanced comminution research. 

Lastly, DOE selected Southern Methodist University, which plans to create the world’s first synthetic mine within an advanced drilling and sensing test facility. 

NAVY GOING NUCLEAR: The U.S. Navy is getting its first advanced nuclear microreactor… in Indiana.  

The details: The Pentagon announced this morning that it will be installing an advanced nuclear Micro Modular Reactor (MMR) at the Naval Weapons Station in Crane, Indiana. It was not immediately clear who would be constructing the reactor or how much energy it would produce, but it is expected to be installed by September 2028. 

The project is being developed in conjunction with the Army’s Janus Program, and is also backed by the Office of the Assistant Secretary of the Navy for Energy, Installations and Environment, the Office of the Under Secretary of War for Research and Engineering, and the State of Indiana. 

It will be the first power-producing reactor in the state. Indiana currently only has one research reactor that is operational. 

The reactor will be owned and operated at the weapons station, providing more power to the commercial electric grid. 

FEDERAL COURT OVERTURNS NEW JERSEY PERMIT FOR GAS PIPELINE: A federal court yesterday rejected New Jersey’s water permit for Williams Co.’s Northeast Supply Enhancement natural gas pipeline. 

In its ruling, the court granted petitions by environmental groups to vacate the Water Quality Certification and sent the case back to the New Jersey Department of Environmental Protection. 

Some background: Environmental groups filed a lawsuit last November against the New Jersey Department of Environmental Protection for unreasonably approving the water certification, which it rejected back in 2019 due to the project’s failure to demonstrate compliance with state water quality standards. 

The Northeast Supply Enhancement pipeline is a $1 billion project that would transfer natural gas from Pennsylvania through New Jersey to New York. The company broke ground on the project in April. 

The company has also proposed to develop the Constitution Pipeline, which would carry gas from Pennsylvania to New York and New England. The pipeline is not under construction. 

ICYMI – HOW FULL IS THE STRATEGIC PETROLEUM RESERVE? Yesterday afternoon, the Department of Energy released the latest estimates on how much oil is currently stored in the Strategic Petroleum Reserve, and as expected, inventories continue to fall. 

As of the end of last week, there were roughly 285.4 million barrels of oil stored in SPR facilities, down by around 1.4 million since the week before. This is the lowest recorded since the fall of 1982. 

This is a part of the Trump administration release of around 172 million barrels, which started soon after the start of the war in Iran to put downward pressure on global crude prices. While the administration has promised to replace the drawdown with around 200 million barrels, analysts have warned that it will take years to refill. 

“It takes longer to fill than it does to drain so the refill will likely run through at least 2029,” Arnab Datta, Director of Policy Implementation at the Institute for Progress, said in a post to X.  

RUNDOWN

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