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The Energy Report

Phil Flynn
http://www.pricegroup.com/
pflynn@pricegroup.com


Not What It Cracked Up to Be. The Energy Report 08/14/2026

As I’ve noted before, keep an eye on the diesel crack spread. It remains the central issue—not crude supply alone, but refining capacity for diesel and other refined products. Ongoing disruptions tied to Iran, the Russia–Ukraine war, and continued attacks on Russian energy infrastructure are keeping product markets tight. The silver lining: these pressures are highlighting refining constraints and opening the door to stronger margins, renewed investment, and a more resilient energy system. Isht now there is no here in the world where you can’t but a barrel of oil if you want it.

That reality was on full display in Bret Baier’s timely interview with U.S. Energy Secretary Chris Wright on Fox News Special Report. Baier pressed on the numbers: “So, obviously the focus is the Strait of Hormuz… This revised number for this week: 100-plus vessels per day before the conflict, 14 on Monday, 14 on Tuesday. You say those numbers are not correct…”

Wright pushed back directly: “Yeah, you bet, Brett… We’re talking and coordinating with every ship. We know every day exactly how many ships transit the Strait of Hormuz in and out… almost all of these ships have their AIS—their transponders are off, so they’re dark. They’re under escort… it’s eight or nine million barrels a day on a running average going through the strait. Plus, you’ve got to add the 6 million barrels a day that are being diverted via pipelines… so in round numbers today, 14–15 million barrels a day are leaving the Arabian Gulf region versus the 20 million barrels a day pre-conflict. So, we’re short five or six million barrels a day… but it’s a much smaller hole than people think it is.”

Baier followed up: “But Mr. Secretary, you can concede, can’t you, that the U.S. doesn’t have total control over the Strait of Hormuz?” Wright’s reply was clear-eyed: “Look, Iran is attempting to hold the world economy hostage and to terrorize their neighbors… They have a losing strategy. At the end, that will lead to the collapse of this regime in Iran as their economy gets strangled… Their ability to cause difficulties is declining. Our ability to escort and bring products out of that region is growing.”

On prices, Baier noted crude hovering near $81 and national average gasoline around $4.07. Wright acknowledged the elevation versus the early Trump-era $3 level but pointed to the path forward: the administration’s goal remains driving prices back toward $3. Timing is uncertain, but the direction is set. He stressed that the real pinch is refining infrastructure worldwide, not just crude delivery—Ukrainian strikes on the Russian refining system are taking a “massive toll” and reducing refined product supply, which is supporting product prices.

Wright’s data, if accurate, reframes the bullish narrative. Even Jeff Currie changed his focus from oil going up to record highs to the diesel crack spread, and is you look at the fact that the US has raised oil production to record highs and other non Opec nations are up to the equation and a more stable export flow from Venezuela now it is all about refining the oil.

Flows out of the Arabian Gulf are running 14–15 million barrels a day versus roughly 20 million pre-conflict—a shortfall, yes, but smaller than the loudest claims. Ships going dark for safety plus expanded U.S. escort capability help explain why oil has not spiked to $100 and may not get there. Reinforcing the stance, Reuters reported Defense Secretary Pete Hegseth stating the United States can maintain its naval pressure on Iranian ports indefinitely, rotating ships as needed.

Put it together and the picture is clearer than the panic. Product markets—especially diesel—remain tight because refining capacity, not just crude barrels, is the bottleneck. Ukrainian attacks on Russian refineries and Iran-related disruptions have spotlighted that constraint. The upside is real: stronger refining margins, fresh incentives for investment in capacity and flexibility, and a system that leans harder on reliable producers and modern infrastructure. This is not a story of permanent shortage. It is a story of markets adjusting, policy holding firm, and opportunity opening for those positioned in refining and products. Keep watching the crack spreads. They are telling us exactly where the real action—and the real opportunity—sits. Also it is time to start investing in more global refining capacity.

It’s also time to talk about the possibility that inflation has peaked. As I mentioned even when I had the honor of being on Bret Baier’s Special Report, Baier on June 17, 2026 when I talked about signs that inflation (especially core, excluding food and energy) could be leveling out / peaking, oil as the big wild card, and the possibility of disinflation if an oil deal came through and now, we are seeing even more clear signs that inflation could be topping out. Yesterday’s Producer Price Index made that trend even more apparent.

The PPI was flat in July — unchanged month-over-month, well below the 0.2% increase expected — and the year-over-year rate cooled sharply to 4.7% from 5.5% in June. Core PPI (excluding food and energy) rose just 0.2% and eased to 4.2% annually from 4.7%. Energy prices at the wholesale level dropped 3.1%, including a 5.7% slide in gasoline, which helped keep overall producer prices in check. That follows Wednesday’s Consumer Price Index, which showed consumer prices rising a modest 0.1% in July. The annual CPI rate slipped to 3.4% from 3.5%, while core CPI came in at 0.2% monthly and 2.5% year-over-year, down from 2.6%. Energy prices fell another 1.5% at the consumer level, continuing the cooling that began after the earlier spike.

The trend is so apparent that the probability of a rate hike dropped pretty dramatically. Markets are now pricing in a much lower chance of the Fed tightening at the September meeting. This of course bodes well for energy demand.

There was a lot of talk about a decrease in energy demand that cooled off prices, but if you look at the big picture the outlook into next year is going to be very strong. One of the concerns on energy demand has been a drop in Chinese imports. We expect the Chinese will start to deal more with the United States, and that should reinvigorate demand heading into next year.

Lower inflation pressure, a less aggressive Fed path, and the potential for stronger global demand — especially from China — all point to a constructive backdrop for energy demand as we look ahead. We also expect that Iran’s stranglehold on the Strait of Hormuz and the Baba al mandir Strait is going to further weaken. Now if we can just get the Russians and the Ukrainians to quit fighting the outlook for the global economy it’s going to be amazing. Fox Weather is going to have a very busy weekend as they track Tropical Storm Lila which is expected to strengthen into a hurricane as it approaches Hawaii’s Big Island and as of early Friday it was located about 455 miles east-southeast of Hilo with sustained winds near 60 mph moving west-northwest while hurricane warnings are up for Hawaii County with tropical storm watches for parts of Maui County and heavy rain of 8 to 12 inches with isolated higher amounts up to 25 inches on the Big Island along with strong winds and rough surf are the big threats this weekend.

Out in the Pacific we are also watching Tropical Storm Hernan which poses little threat to land and the Atlantic looks quieter on the named-storm front right now with no active tropical cyclones but the National Hurricane Center is monitoring a couple of tropical waves where one in the central Atlantic east of the Lesser Antilles has decreasing development chances around 30 percent while another farther east near the Cabo Verde region has a better shot at gradual development later this weekend or early next week around 50 percent over 7 days so interests in the eastern Caribbean should keep an eye on the first system for gusty winds and heavy rain this weekend.

Turning to natural gas if we look at the Fox Weather outlook for next week alongside yesterday’s inventory report it kind of tells the story of a market still trying to find clear direction as the EIA reported a 36 Bcf build for the week ending August 7 bringing total working gas in storage to 3153 Bcf which is 25 Bcf below year-ago levels but a comfortable 198 Bcf or about 67 percent above the five-year average and the build was broadly in line with seasonal norms and expectations.

Storage remains healthy heading into the final stretch of injection season and the broader outlook still points to elevated inventories by the end of October so that surplus has kept a lid on prices even as weather models shift around while front-month natural gas futures have been hovering in the mid-to-high 270s recently reflecting that tug-of-war between solid supplies LNG demand fluctuations and whatever the next weather pattern throws at cooling demand Bottom line tropical activity in the Pacific is the immediate weather story this weekend while the Atlantic stays relatively quiet for now and for natural gas traders the storage cushion is real so any bullish weather-driven push will need to overcome that surplus and keep watching the models and the next EIA print because direction is still being decided week by week.

Download the Fox app to stay on top of the latest storm tracks and natural gas market updates. Also stay tuned to the Fox Business Network! Invested in you! Call today to get my special reports and to open your account by calling 888-264-5665 or by emailing me at pflynn@pricgroup.com.



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Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide.

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Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

Contact Phil at 1-888-264-5665 or pflynn@pricegroup.com.