Dallas Fed president sees oil shortages if Strait not opened

The president of the Federal Reserve Bank of Dallas has some advice for all trying to stop the Iran War: Get the Strait of Hormuz opened. Soonest.

Otherwise, global oil supplies will get severely constrained, Lorie Logan told attendees at the Bank of Japan Institute for Monetary and Economic Studies Conference.

And, she said, fuel consumption might need to fall more than it already has since Israel and the United States attacked Iran starting on Feb. 2.

Before the war erupted, about 20% of the world's crude oil passed through the strait every day, Logan noted.

The war has reduced global oil supply by nearly 13 million barrels per day, or more than 10%. Oil-reserve drawdowns by nations around the world have filled much of that shortfall so far. U.S. crude-oil exports have helped, too, she said.

Then, she added, "However, inventories are finite."

Oil production can't be easily expanded, she said. The Dallas Fed's most recent survey of oil executives suggests U.S. oil output might only be able to add 250,000 barrels a day of oil to the global supply by the end of the year and perhaps 500,000 barrels a day in 2027.

Holding production back will be three realities:

• Producers, she said, "exercise strict capital discipline." Meaning, they don't invest in new wells and exploration without a clear path to positive returns.
• Producers, from giants like Exxon Mobil and Chevron to smaller companies "face tight supplies of labor and other inputs."
• Many wells produce both oil and natural gas, but, Logan said, "There is little pipeline capacity to move more gas out of the fields in West Texas."

Plus, the facilities to export crude or natural gas are limited.

So, that brought Logan to her most blunt point. "If shipping through the strait does not soon return to prewar levels, world oil and natural gas consumption could need to fall more meaningfully than it has so far."

The consequences would depend on how easily end users can "switch to other energy sources or use energy more efficiently."

She did offer a thought of cheer: "One way or another, I expect energy markets to come into rough balance before too long. If the molecules aren't available, the world can't consume them."

Traders push oil prices down on peace hopes

Logan's comments were made long before markets opened in the United States.

Traders were behaving on May 27 as if a peace deal is close.

Light sweet crude, the U.S. benchmark, was down 4.6% to $88.69, per 42-gallon barrel, the lowest level since a brief price decline in late April. Brent crude was off 4.6% to $92.24 a barrel.

Light sweet crude peaked at about $104 a barrel on May 4, according to data from OilPrice.com. Brent hit a 52-week high of $114.40 a barrel on May 4, OilPrice.com data showed.

U.S. motorists were paying lower prices to fill up. GasBuddy put the U.S. national average at $4.419 a gallon on May 27, down nearly four cents from a day earlier and off 2.3% from May 22.

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Current realities are unsettled

But the geopolitical situation remains unsettled, to say the least. Getting oil out of the Persian Gulf region is tricky at best.

Traffic through the Strait is highly limited, though some tankers have delivered oil cargoes to clients in Asia.

Meanwhile, May 26, the United States attacked two Iranian two boats laying mines in the Strait of Hormuz. The ships belonged to Iran's Islamic Revolutionary Guard Corps.

Meanwhile, CNN reported that Iranian state TV said a proposed memorandum of understanding calls for US military forces to withdraw from the vicinity of Iran and lift the blockade of Iranian ports.

"In return, Iran has committed to restoring the number of commercial ships transiting the Strait of Hormuz to pre-war levels within one month," the report said.

The White House called the report "a complete fabrication."

Related: Exxon Mobil's future rests on massive play (it isn't Venezuela)

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This story was originally published May 28, 2026 at 8:07 AM.