URGENT Danger In Oil Prices
By James and Michael Hall
James and Michael Hall—authors of the popular The Sword of Damocles: Our Nuclear Age, now on Audible, Kindle and Amazon books. jameshall042999@gmail.com
Beneath a sky at war with itself, a human war rages below.
Art and poetry by James Hall.
We keep hearing that more oil is flowing out of the Middle East, but what few people realize is that getting each barrel to market now costs far more than it did before the war. Simply put, it is not sustainable.
Look at it this way, the oil price quoted on the evening news, about $100 a barrel for Brent crude, is a futures price, which is a bet on what oil will be worth at a later date. Yet it says little about what it actually costs to move a barrel from the Persian Gulf to a refinery in the US or Europe these days.
Since the war began, shipping costs from the Gulf to Asia have risen from roughly $6 per barrel to more than $30. War-risk insurance, once only a fraction of a tanker's value, can now reach 10 percent, adding as much as $20 million to a single voyage by a supertanker. In addition, crews receive hazard pay to sail through waters threatened by missiles and drones. At the height of the crisis in April, Asian refiners were paying more than $170 for oil that was traded at only $95 on futures markets.
American drivers are already feeling this reality at the pump, where gasoline has climbed past $4.50 a gallon and diesel has spiked above $6.50. Unlike crude traded on paper, refined fuels directly absorb every layer of real-world friction—surging maritime insurance, longer detour routes, and strained refinery capacity.
That disconnect poses a hidden structural risk. Headline futures like West Texas Intermediate (WTI) and Brent reflect benchmark delivery points in Cushing, Oklahoma, and the North Sea—not the immediate cost of a barrel exiting the Persian Gulf. Because Middle Eastern barrels aren’t dropped directly into those domestic contracts, market stress doesn’t hit headline screens instantly. Instead, it surfaces first in the physical trenches which surge Official Selling Prices (OSPs), regional Dubai/Oman cash premiums, and runaway maritime freight costs.
But paper and physical crude cannot inhabit separate universes for long. As refiners find Middle Eastern crude economically prohibitive or physically cut off, they are forced to hunt for replacement barrels from alternative basins, including the Atlantic and US Gulf Coast. As that substitute demand tightens available supplies, the paper market is violently dragged upward to match physical replacement costs.
If physical shortages persist and that convergence happens abruptly, futures prices could surge in a matter of days rather than weeks. Traders positioned for lower prices would face margin calls and could be forced to buy back contracts at almost any cost, pushing prices even higher. Businesses that failed to hedge would absorb the full shock immediately.
Markets have seen this kind of squeeze before. In April 2020, US oil futures briefly fell below zero when storage capacity ran out and traders scrambled to avoid taking delivery. The circumstances were different, but the lesson is the same.
When paper prices drift too far from physical reality, the adjustment can be sudden and severe. Sooner or later, the two reconnect, and that reckoning rarely ends well.
As noted in our previous article, America’s core issue isn't just an oil issue. The real problem is that much of our domestic refining infrastructure was never configured for the type of oil we produce domestically. Consequently, we remain heavily reliant on the global market—leaving us deeply exposed to the ongoing conflicts across the Middle East and Russia.. Please read: www.authorshall.com/blog/r4eeh2444koics5xu6y4n2ybouq843
The latest incidents:
Oct 3
The VLCC Cameroon Prosperity was reportedly struck by an unknown projectile while transiting the Strait of Hormuz.
A crude tanker was hit above the waterline by an unknown projectile.
Oct 4
The VLCC Ghana Prosperity was reportedly struck by an unknown projectile in the Strait of Hormuz.
The LPG carrier Vela Gas was struck while operating in the Strait of Hormuz.
Oct 5
The LNG carrier Maran Gas Mystras was hit while transiting the Strait of Hormuz.
A vessel was hit and caught fire in its engine room.
UK Maritime Trade Operations (UKMTO) reported another tanker being struck by an unknown projectile while transiting outbound through the Strait of Hormuz.
A tanker entering the Strait of Hormuz near Oman was reportedly warned by Iran's Islamic Revolutionary Guard Corps (IRGC) to turn around or face possible attack.
Oct 5 (Saudi Arabia)
Houthi forces attacked King Abdullah bin Abdulaziz Airport in Jazan and Najran Airport near the Yemen border.
Saudi Arabia's civil aviation authority confirmed the attacks, reporting three people wounded and material damage.
Oct 6
The Panama-flagged tanker On Peace was struck by an unknown projectile in the Strait of Hormuz, causing a fire and injuring 12 of the 19 crew members onboard. The injured crew were evacuated to Oman for treatment.
Saudi authorities reported Houthi attacks targeting Riyadh, Abha, Khamis Mushait, Jazan and Najran.
The Saudi-led coalition said it intercepted missiles and drones around Khamis Mushait and Jazan.
Flights at Riyadh's King Khalid Airport were halted for more than an hour.
Oct 7 (Oman / Strait of Hormuz)
Iran's Revolutionary Guard navy reportedly turned back the Liberian-flagged Singapore Energy about 11 nautical miles off Oman by threatening to fire on the vessel.
Maritime security officials reported a continuing pattern of attacks and security incidents affecting commercial shipping in and around the Strait of Hormuz, one of the world's most important oil transit chokepoints.
Today, October 7, Iranian-backed Houthi forces launched an assault on the Arabian Peninsula to encircle the strategic Yemeni city of Taiz, cutting key supply routes toward Aden. Simultaneously, the group escalated long-range drone and ballistic missile strikes against Saudi airbases, critical infrastructure, and Aramco oil facilities. In response, Saudi Arabia and Yemeni coalition allies mounted counteroffensives to secure border zones and reclaim key Red Sea territory around Mokha. Despite these efforts, Riyadh faces persistent aerial threats and energy security risks, compounded by limited direct support from Washington.
Bibliography
US Energy Information Administration. “Benchmarks Play an Important Role in Pricing Crude Oil.” October 28, 2014. https://www.eia.gov/todayinenergy/detail.php?id=18571. [eia.gov]
Reuters. “Oil Vessel Transit Costs Through Hormuz Escalated After Iran War, ENOC Executive Says.” September 9, 2026. https://www.reuters.com/world/middle-east/oil-vessel-transit-costs-through-hormuz-escalated-after-iran-war-enoc-exec-says-2026-09-09/. [reuters.com]
Hussain, Noor Zainab, and Manya Saini. “Maritime Insurance Premiums Surge as Iran Conflict Widens.” Reuters, March 6, 2026. https://www.reuters.com/world/middle-east/maritime-insurance-premiums-surge-iran-conflict-widens-2026-03-06/. [reuters.com]
US Energy Information Administration. “Low Liquidity and Limited Available Storage Pushed WTI Crude Oil Futures Prices Below Zero.” April 27, 2020. https://www.eia.gov/todayinenergy/detail.php?id=43495.