Businesses and governments managed to keep energy prices from skyrocketing as much as feared during the Iran war by leaning into a “just-in-time” delivery system that harnesses innovations in digital and satellite technology and that reduces the need to stockpile barrels of oil.
Call it the “Amazon of oil,” said Jim Wicklund, a veteran oil analyst and managing director at the PPHB energy investment firm, comparing energy industry dynamics to the ecommerce giant’s famous mastery of inventory and logistics.
Even with President Trump declaring the Iran ceasefire “over” on Wednesday amid a fresh exchange of military strikes, the U.S. benchmark for crude prices still only spiked about 5% to $74 per barrel—way below the mid-May high of $112.
While energy traders may see the latest attacks and verbal barbs as dips along the negotiation rollercoaster, they’ve also been encouraged by the adaptability of global energy logistics, even amid the greatest global energy shock of the modern age when the effective closure of the Strait of Hormuz temporarily cut off almost 20% of the world’s oil and liquefied natural gas supplies.
“When you go back to the 1970s when we had the oil shocks, you had no way of knowing what oil was where and what it was doing,” Wicklund told Fortune. “Today, I can hit my terminal and find every tanker full of oil on the ocean, who owns it, what’s in it, and who to call to get it diverted to me. So, inventories have not meant nearly as much to oil prices here in the last few years as they used to.
“The correlation between inventories and oil price has been dropping from a high correlation to almost no correlation today. I don’t need physical inventories like I used to. I can order immediately off the Amazon of oil and buy cargoes on the water,” he said.
Another saving grace for logistics was the Trump administration’s decision to temporarily waive the 106-year-old Jones Act, which requires cargo ships moving between U.S. ports to be U.S. built, flagged, and manned, reducing the number of vessels available to move crude oil and refined products between domestic ports.
The waiver allowed more ships, for instance, to move fuel from the U.S. Gulf Coast through the Panama Canal and up to California, which has dealt with newly shuttered refineries in recent months, to help alleviate shortfalls.
The China factor
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While large commercial oil inventories haven’t meant as much as they once did, the national strategic reserves of the U.S. and especially China have proven pivotal. The other major reason oil prices didn’t rise as high as feared is because China built up its storage stockpiles to all-time highs and dramatically cut down on its imports after the war began.
Before the war began, China imported more than 11.5 million barrels per day. By June, China’s imports plunged below 7 million barrels daily, effectively lowering global oil demand by almost 5 million barrels per day. Although China doesn’t reveal many details, the U.S. government estimates China’s oil reserves had risen to about 1.4 billion barrels before the war began—the product of a yearslong emphasis on building up strategic stockpiles.
“China as a source of moderation on energy is something that is for sure new,” said Arjun Murti, energy macro and policy partner at the Veriten research and investment firm. “We did not guess or predict that China would reduce the oil imports by such a massive amount, which had such a huge impact.”
Likewise, the U.S. Strategic Petroleum Reserve is now at its lowest level since 1983, but it still holds more than 300 million barrels of crude—319 million barrels as of July 3—which is down from 415 million barrels at the beginning of the war.
And because Trump wants to keep fuel prices lower, there’s little chance the U.S. starts replenishing its strategic reserves before the midterm elections this year, analysts said. Trump has authorized the overall release of 172 million barrels over several months, so supplies could still dip much lower before they’re built back up maybe beginning next year.
The resiliency of the energy markets has quieted the “doomsdayers” who predicted record highs of $200 per barrel oil, Wicklund said.
While he never projected such high spikes, Wicklund was “surprised” oil prices have fallen as much as they have in late June and July.
“I’m starting to believe,” he said. “Instead of trying to figure out why the market is wrong, figure out why you’re wrong.”
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