U.S. Energy Acts as Global Stabilizer, Straining Inventories Amid Hormuz Crisis

The U.S. energy system, underpinned by record production from regions like the Bakken, has helped cushion the global shock from the loss of Middle East oil and LNG supplies after the closure of the Strait of Hormuz, according to an analysis from the American Petroleum Institute (API). The American Petroleum Institute stated that "America's energy system has helped cushion what could have been a much more severe shock."

This role as a global stabilizer is a direct result of massive, sustained investment in the upstream sector. Since the shale revolution began, the U.S. oil and natural gas industry has invested about $150 billion every year in upstream production alone, API estimates. For Bakken operators, this underscores their critical contribution to national output that has kept crude prices in check for most of the past five months despite the ongoing conflict.

However, this comes at a significant cost to domestic market stability. The surge in record-high crude and fuel exports is depleting U.S. inventories. America's inventories of crude oil and petroleum products have slumped below the five-year average for this time of year. Specifically, middle distillate inventories are now 12% below the five-year average. This leaves narrow margins of error in the production, refining, and export systems, making the market vulnerable to sudden disruptions like hurricanes or refinery outages.

The tight market is reflected in consumer fuel prices. Due to the crude price surge on international markets, the national average gasoline price is now $4 per gallon. This is about $1 higher than at the end of February, before the U.S. and Israel started bombing Iran, and nearly $0.90 higher than at this time last year.

For North Dakota, the analysis confirms the Bakken formation's pivotal role in national energy security during a prolonged geopolitical crisis. The record U.S. crude oil production and exports cited by the API are sustained by output from major shale plays. Yet, the report also signals ongoing pressure. With the path to a permanent de-escalation in the Middle East unclear, the U.S. system, including Bakken producers, will continue offsetting some—but not all—of the missing Middle East supply, maintaining a tight balance between supporting global markets and managing domestic inventory risks.