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The Energy Report

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


The New Federal Reserve of Oil. The Energy Report 08/4/2026

We used to say OPEC was the Federal Reserve of oil. That title has been taken away.

President Donald Trump is now, without question, the most powerful man on the planet when it comes to oil and refined product prices. And like The Federal Reserve President Trump can act like the Federal Reserve and he perceives perhaps irrational exuberance in the market. It is also a testament to his policies of drill baby drill and hemispheric energy dominance.

Gasoline and diesel crack spreads collapsed after he publicly called out ExxonMobil and Chevron, saying they were “making too much money” and should return some of those profits to the public. He also holds the ability to call off attacks on Iranian infrastructure. Now Treasury Secretary Scott Bessent is saying we may have an Iran deal to open the Strait of Hormuz as early as tomorrow’ highlighting to hedge funds and speculators to not get too comfortable just piling onto the long side, which could avoid e the potential for a demand damaging spike.

Market Watch also reported that a Qatari official says that the U.S. Treasury secretary discussed a potential short-term agreement between the United States and Iran that could reopen the contested Strait of Hormuz. Qatar’s foreign ministry spokeswoman said talks between the United States and Iran are “ongoing” and focused on de-escalation and reopening the strait, although she added that no direct talks are taking place.

Yet at the same time, we have to be careful about being too tough on oil companies, as it’s clear that the industry will need the profit incentive to add production and refining capacity. So, how much profit is too much?

President Trump said that “When you look at one company where they made 12 times what they made the year before, they ought to give some of that back to the public,” Trump told reporters in the Oval Office on Monday. “And they better cut the retail price, the consumer price.” Trump described himself as a “big free enterprise guy,” but made clear he is frustrated by the oil industry’s profits at a time when fuel prices are rising because of the conflict with Iran. “You’re surprised I’m saying it. I’ll say it loud and clear.” y.”

Of course, as I pointed out, he also sound a bit like former President Joe Biden who blamed oil companies for risng prices even as it was clear that his own anti-fossil fuel agenda was laying a large part in the early rice increases and later the Russian invasion of Ukraine that happened under his watch. Yet it’s clear that oil companies are going to need big profits to rebuild inventories and add global refining capacity. Take it from Aramco CEO Amin Nasser, who said the world has lost more than 2.6 billion barrels of oil supply destined for critical industries. Inventories, strategic reserve releases, and Aramco’s own infrastructure have reduced the net impact to around 1.8 billion barrels—but that still leaves a massive hole for global markets to work through. And here’s the key point: “The global refining system is operating near maximum utilization, leaving little buffer against major disruptions,” Nasser said. In other words, prolonged refinery outages would put even more pressure on global energy supplies, with almost no spare capacity left to absorb the hit. Nasser also said that even if the Strait of Hormuz reopened today, replenishing depleted inventories could take up to 18 months at an average rate of 2.1 million barrels a day. The bottom line is that this recovery will be measured in quarters and years, not days.

Aramco also posted enormous profits. Its second-quarter adjusted net income jumped 33% as the company benefited from the war-driven surge in oil prices while keeping exports flowing through pipelines that bypass the Strait of Hormuz. That is a reminder that when the strait is contested, physical barrels and alternative delivery routes still matter more than headlines.

So the Federal Reserve and President Trump have to be careful. I think it’s perfectly fine to jawbone prices and crack spreads lower to keep speculative fever in check—nobody wants a runaway market that hurts consumers or overheats the system. But anything beyond that—anything that starts interfering with the profits energy companies need to reinvest—could have real long-term ramifications for meeting future demand.

Look at the blistering manufacturing renaissance we’re seeing right now. Yesterday’s ISM Manufacturing PMI came in at 55.6 for July—up a strong 2.3 points from June and the highest reading since May 2022. That’s the seventh straight month of expansion, and it wasn’t just a headline number. New orders rose to 56.7, production jumped all the way to 58.5 (the strongest pace since late 2021), and factory employment finally flipped back into expansion at 52.8 after 33 months of contraction. The Federal Reserve’s own industrial production data already showed manufacturing output growing at a 4.7% annualized rate in the second quarter—the fastest quarterly pace in years.

This isn’t a soft bounce. This is real, broad-based strength—new orders flowing, backlogs building, and factories hiring again as well as the Trum Adminstrations policies to bring back manufacturing to the us, something his critics said could not happen.

And that kind of manufacturing surge doesn’t run on hope. It runs on energy. Industrial natural gas demand is already setting successive records; the EIA sees industrial gas consumption climbing further in 2026 and 2027 precisely because the natural-gas-weighted manufacturing index is rising.

Factories, chemicals, plastics, fertilizers, refining—they’re all pulling more molecules. Oil demand gets the same lift: more petrochemical feedstock, more transportation of goods, more diesel for the trucks and rail moving product out of these plants.

If we want this manufacturing renaissance to keep rolling and to meet the next leg of demand growth, the companies that produce and refine the energy have to stay healthy enough to invest. Healthy margins today fund the wells, the pipelines, the processing plants, and the refining capacity that tomorrow’s factories will need. Jawboning is one thing and a good thing. Squeezing the industry’s ability to reinvest or damaging ‘windfall profit taxes” is something else entirely and should not happen and probably will not—and the data we just got reminds us why the distinction matters. Healthy margins today fund the wells, pipelines, processing, and capacity that tomorrow’s factories—and the next leg of power and industrial demand—will need.

Natural Gas , we’re watching the Fox Weather app closely because it’s driving the near-term tape. Natural gas has been selling off at times as forecasts turn a bit cooler in spots, with models showing disagreement—GFS leaning hotter in the East and South while ECMWF is warmer in the Midwest. That uncertainty keeps sellers active even as storage sits in surplus. But Fox Weather’s outlook continues to flag persistent heat potential across key regions into mid-August, with the ridge of high pressure likely sticking around. That means power burn for air conditioning remains a solid support for gas demand, especially when layered on top of the industrial load from this manufacturing rebound.

Make sure you download the Fox Weather app ans also stay tuned to the Fox Business Network ! Sign up for you account and updates by calling 888-264-5665 or email pflynn@pricegroup.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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