Can Government Action Tame Rising Energy Prices?

The escalating U.S.-Iran conflict threatens global supply chains for energy-intensive commodities like aluminum, semiconductors, and fertilizers, with the Strait of Hormuz representing 20% of global oil supply. Current policy levers—including alternative pipelines in Saudi Arabia and the UAE, naval escorts, and coordinated IEA strategic stock releases—can only mitigate approximately 9 million of the potential 20 million barrels lost per day. This projected 11-million-barrel deficit is three times larger than the 2022 Russia-Ukraine supply shock, forcing nations like the Philippines and Sri Lanka to implement aggressive energy rationing. In the U.S., despite Jones Act waivers and Strategic Petroleum Reserve releases of 1.4 million barrels per day, gasoline prices have surged toward $4 per gallon. Consequently, near-term Brent crude forecasts have risen to $110 per barrel, signaling a period of weaker economic growth and persistent inflation as policy tools struggle to offset the massive disruption.