SCOTT SIMON, HOST:
Oil prices have spiked this week since the U.S. and Israel attacked Iran, and that's pushing up U.S. gasoline prices, too. NPR's Camila Domonoske covers energy and joins us now. Camila, thanks so much for being with us.
CAMILA DOMONOSKE, BYLINE: Happy to be here.
SIMON: And what's the latest?
DOMONOSKE: Well, prices really shot up yesterday. For the first half of the week, prices were up, but Rebecca Babin, an oil trader, told me on Monday that markets were not panicking. Well, she emailed me on Friday afternoon and said, quote, "panic has officially set in," as in oil traders are panicking now. The global benchmark for crude closed for the weekend at a little under $93 a barrel. That's up from 70 before the attack. And these higher crude prices have pushed up gasoline more than 14%, which is a bigger week-on-week jump than we saw after Russia invaded Ukraine.
SIMON: What changed from Monday to Friday?
DOMONOSKE: Well, hopes for a quick resolution to the conflict faded over those days. We have also seen attacks on oil infrastructure in countries across the key - across the Gulf region. But above all, there is this key waterway folks have heard about, right? Here's Helima Croft with RBC Capital Markets earlier this week.
HELIMA CROFT: The Strait of Hormuz remains effectively a parking lot with tankers avoiding going through the critical waterway that accounts for 20% of global oil and LNG exports.
DOMONOSKE: LNG is liquefied natural gas, and, yeah, 20%, right? Iran has threatened to close the strait many times before but never actually done it. And the near-halt of ships passing through has had knock on effects as the days passed, right? Iraq and most recently Kuwait have had to stop some oil production because there is simply nowhere to put it.
SIMON: How is Iran keeping the strait closed?
DOMONOSKE: Yeah. It's not physically blocked. Some ships have actually gotten through. But Iran has attacked multiple ships attempting the passage with drones and missiles. So do ship owners and captains want to risk the loss of an oil tanker, the environmental disaster that could create, the lives of their crew, right? Meanwhile, ensuring a trip through the strait got a lot more expensive. I chatted with Neil Roberts from Lloyd's Market in London, which has been pricing the risk of sending cargo through war zones for centuries - since the days of the British Empire when the ships in question had sails, right? And he says that coverage is available, but the price has to match the risk, right? And this is very risky.
Now, the U.S. has now offered to provide both insurance and naval escorts to ships in the region. But yesterday, the agency handling that insurance said that they can cover up to $20 billion total. JPMorgan Chase has estimated that the need is more like $350 billion. And as for the U.S. escorts, Robert said that a lot of ships would really rather have a neutral escort from a country that is not a part of this war.
SIMON: Camila, can the world replace the oil that is stuck waiting to come through the strait?
DOMONOSKE: Partially. So we're talking about some 20 million barrels per day that's not moving. There are some stockpiles globally, and some oil from the Gulf region can be redirected through pipelines, if those aren't attacked. Kevin Book is the co-founder of ClearView Energy Partners. He says, by his math, the world might make up all but one to 3 million barrels.
KEVIN BOOK: But that's still an enormous gap.
DOMONOSKE: And that's relying on reserves that would eventually run out.
SIMON: During other price shocks - after the invasion of Kuwait for example, the run-up to the war in Iraq, the crises in the '70s - the U.S. was a lot more reliant on oil from the Middle East. Isn't that some solace for investors and consumers?
DOMONOSKE: Yeah. It is different now. The U.S. is the world's top oil producer making more oil than it uses. That is one reason oil isn't, like, $200 right now, along with the rise of clean energy. But you have to remember, this is a global market for crude oil. So the oil passing through the strait would be mostly heading for Asia, not for the U.S., but Americans are still going to feel the price hikes - not just in gasoline, but in everything - because transporting stuff is part of the cost of everything we buy.
SIMON: NPR's Camila Domonoske. Thanks so much for being with us.
DOMONOSKE: Thanks, Scott.
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