For a century, the Strait of Hormuz has been one of the world’s key energy choke points. But during the past couple of decades, the U.S. relationship to the shipping lane has changed.
In this special episode of the Energy Capital Podcast, Josh Rhodes talks with Michael Webber about what the Iran conflict means now, especially for Texas. The U.S. is not as vulnerable to oil shortage as it once was, but greater energy self-sufficiency does not insulate the country from global prices.
The U.S. now produces more oil and gas than it did in the 1970s, when another energy crisis rooted in the Middle East rattled the U.S. economy. That leaves the nation less vulnerable from a security perspective.
But consumers in Texas are still tied to global markets through pricing, refining constraints, and fuel trade flows. As Webber explains, even if the country has enough energy overall, price spikes abroad can still show up here at the pump, and they can linger.
The conversation gets into a few issues that will develop over the coming weeks and months:
Why gasoline and diesel prices may rise with a delay, then fall more slowly than consumers expect.
Why U.S. oil abundance does not fully protect Americans from disruption overseas.
Why Texas benefits, and what’s at risk, from the state’s current energy mix.
Rhodes and Webber also stress that resilience covers a range of issues: what resources can be refined, what generation and infrastructure can be built, and how quickly the system can adapt to challenges. That spotlights variables including refining capacity, permitting reform, and the roles of wind, solar, batteries, and electrification in reducing exposure to fuel volatility.
The episode explores how Texas fits into a deeply interconnected global energy system, even after the state’s shale revolution.The unresolved question: if the disruption in the Middle East continues, where will the state’s real vulnerabilities start to show?
Timestamps
00:00 - Iran Conflict & U.S. Exposure
02:29 - Why Prices May Rise
03:57 - Self-Sufficient, Still Coupled
06:07 - Texas Refining Constraints
08:03 - SPR, Export Bans, and Policy Tools
10:48 - Renewables, Gas, and Energy Security
16:35 - Affordability Politics
19:14 - Permitting Reform & Outro
Resources
People & Organizations
Joshua Rhodes (LinkedIn)
Michael Webber (LinkedIn)
International Energy Agency (Website)
U.S. Strategic Petroleum Reserve (Website)
Company & Industry News
US gasoline prices soar past $3.75 a gallon as Middle East war rages on
Oil settles up 9% as Iran vows to keep Strait of Hormuz closed
Goldman Sachs raises Q4 Brent, WTI crude price forecast amid longer Hormuz disruption
Related Podcasts by Energy Capital Podcast
Related Posts by Texas Energy & Power
Transcript
Joshua Rhodes (00:05.558)
Welcome to the Energy Capital podcast. This is a bit of a special edition where we’re going to talk to Dr. Weber again. We’re talking on Friday, March 13th, and we’re really kind of doing a little bit of a current events type take on the energy impacts of the current conflict in Iran and the Strait of Hormuz. Dr. Weber just published an article or an op-ed in the Houston Chronicle where he just talked about the energy implications of what that would mean for the U.S.
Joshua Rhodes (00:33.624)
So Dr. Michael Weber, welcome back to the Energy Capital Podcast.
Michael Webber (00:39.502)
Thanks so much. It was great to be here and have another conversation with you. I appreciate you inviting me. Absolutely.
Joshua Rhodes (00:43.854)
Well,
Joshua Rhodes (00:44.234)
let’s dive in. You wrote in your op-ed that the energy risks we worried about 20 years ago, like disruptions to the Strait of Hormuz, that are actually happening right now, but you argue that the U.S. might not care as much this time around. Why is that?
Michael Webber (00:58.51)
That’s right. say that first of all, the risks of the Strait of Hormuz have been known since the seventies, but really amplified as a risk in the eighties with the Iran-Iraq-Tinker war that happened in the eighties and is really the main justification for why the US Navy projects so much force there just to keep the shipping lanes open, all that kind of thing. So the risk of the Strait of Hormuz as a choke point for global commerce around oil and refined products and helium and aluminum and other things like fertilizer area, that’s been known. But what has changed is how much we might care.
Michael Webber (01:27.648)
So 20 years ago, when I studied this for Think Tank doing national security work for the Pentagon, we identified the closure of the Strait of Hormuz as one of the biggest single point risk failures the world could go through in terms of destabilizing global energy markets. But that was before the shale revolution, all these other things that happened 20 years ago. So we were really worried about what this might mean in terms of United States even getting access to the resources in the first place, plus price spikes and everything else. In the 20 years since we did that study for the Pentagon,
Michael Webber (01:54.626)
The Shell Revolution’s come through, so we have a lot more domestic oil and gas production. We’re now exporting instead of importing. We have a lot more wind and solar, so we need less domestic fuels like coal or natural gas in the power sector. The whole situation’s changed where we’ll be exposed to the risks of higher prices, but we have enough supplies. We don’t have worry about absolute supply cutoff. And that’s a good position to be in. I think we should celebrate when we can policy successes. And I would say the last 20 years have been a combination of policy successes.
Michael Webber (02:22.434)
that put us in a better national security position when it comes to disruption to Middle Eastern flows of energy.
Joshua Rhodes (02:29.122)
So Americans are already seeing higher gasoline prices and diesel prices after this escalation. You mentioned that these price spikes can often lag disruption by a week or two, but should consumers expect this to get worse?
Michael Webber (02:41.326)
I expect it to get worse and I also expect the high prices to linger for a while. So there are a couple of things that happen. The disruption happens physically. The prices start to reflect it in the futures market pretty quickly, but at the gasoline pump say a little bit later. So there’s some lag time between physical disruption and higher prices. And then there’s also lag time from when the disruptions are settled and when prices come back down. But sadly, as one of the sort of bitter ironies of life, prices go up a lot faster than they come down for variety of reasons.
Michael Webber (03:08.622)
Yep. So even if the disruptions sorted out in the next few days, I expect higher prices to hang around for a while because people have to refill their inventories and they have to price in the risk of volatility or the risk of additional tax. So high prices will be here for a little while. And I think that’s one of the things about the US situation is that we are now self-sufficient on energy. It’s not like we’re independent. We’re still coupled to the global markets and being independent is different than being self-sufficient. We’re self-sufficient. We have enough energy to run our economy, but we are connected to the global economy.
Michael Webber (03:37.614)
So even if we have the energy, if the global price goes up, our price will grow up as well. And there’s all these sort of couplings that happen to the prices, but also these lag times. So I think we got prices that’ll be high for a while. Secretary of Energy Chris Wright, it’ll be settled in a couple of weeks, not months. I expect prices to be high for a few months, but who knows? We’ll see how it goes.
Joshua Rhodes (03:57.358)
Okay. We produce a lot of oil in the US now after the shale revolution, but we can’t always refine that oil here. I mean, we import a lot of crude from other regions like the Middle East, but we also export a lot of our sweeter crude to Europe where they can actually refine it. So can you speak to how even though we produce a lot of oil now, we’re still coupled to the global markets?
Michael Webber (04:16.8)
It’s really kind of a fascinating irony in many ways that we did not foresee the Shell Revolution. And so what we saw instead, looking forward from the 1980s onwards, was more imports of heavier oils from Venezuela or the Canadian oil sands, or even like the heavy sour crude from Saudi Arabia or other places. These heavier crudes, which are more difficult to refine, but we put the money into our refineries to make the refineries capable to handle those heavier crudes. Then we find all those light sweet crude, which is like the champagne of oil, and we’re buying the beer of oil.
Michael Webber (04:46.712)
the less valuable coarser crude that we know how to refine, but selling our more valuable champagne crude. So we can sell our light sweet crude at a higher price than what we pay for the heavier sour crudes. But the challenge is even when you have an abundance of the light sweet crude in West Texas for East Texas refiners, those East Texas refiners are not fine tuned for it. So you’re exactly right. We’re exporting the West Texas light sweet stuff to other people, refineries in say Asia or Europe and importing the heavier crudes
Michael Webber (05:15.97)
to turn into jet fuels and things like that. And that’s one of the couplings of the global market. Though we have enough energy in the nation to be self-sufficient, we’re not refining our own crude into the products we need for our cars and trucks and planes. We’re still depending on the global market to provide the crude to do that. And that’s okay. Like financially, that works out for us until there’s a major disruption and we can’t get the crude we need for our refineries. And that’s a risk we have to think about.
Joshua Rhodes (05:39.234)
Well, Highlife claims to be the champagne of years, but I don’t know if there’s a... oil.
Michael Webber (05:43.402)
Yeah, so I haven’t seen that ad yet. feel like someone should do that. Yeah, the West Texas Intermediate is the champagne of beers, something like that. It is kind of a funny sort of global trade situation because you could do that with foods as well like, hey, I’ll buy your champagne if you buy my beer, is a pretty typical global trade kind of conversation to have. Or I’ll buy your really high-end cheese if you buy my low-end refined food products or something like that. So we do that kind of thing for other markets as well.
Joshua Rhodes (06:07.534)
they recently announced like a new refinery in Texas that might be able to handle this.
Michael Webber (06:12.366)
through
Michael Webber (06:12.526)
though? That’s pretty exciting. So there is a big announcement for a new refinery for the first time in 50 years, for the most part for the last several decades, four or five decades, we’ve been shutting down refineries, primarily around environmental reasons. Some of the older refineries were less efficient and dirtier. So refineries in the United States have becoming fewer but bigger and more capable and cleaner. So we have fewer refineries, but more refining capacity. And that refining capacity has lower emissions and
Michael Webber (06:39.15)
more efficient throughput and things like that, but designed for the heavier crews like we mentioned. There’s an announcement of a new refinery in Brownsville that can take the light sweet crude, which is pretty exciting. And it’s a new refinery. It’s kind of exciting because it’s been 50 years. It’s also not a new announcement. It was first proposed a decade ago and they announced their construction permits in 2024, like two years ago. So the latest announcement, it’s not really clear it’s going to be built, but there is an announcement. President Trump announced it, for example, and Secretary of the was celebrating it. It’s not even 100 % clear to me who the actual investors are or whether there are
Michael Webber (07:09.144)
the firm off-take agreements. But if there are actual investors in off-take agreements and it gets built, it will take several years. That would be pretty interesting. It would be probably good for the Texas economy and good for us to have a local user of the light-sweep crude. There’s a lot of reason to be skeptical that it’s not really going to happen, but high prices are interesting because it helps the producers, but high prices make it harder for the refiners. And so a high price environment might not be a great time to build a refinery in terms of high price crude, except that
Michael Webber (07:39.15)
Jet fuel and diesel and gasoline prices are high, so the product prices are higher, so then it would be a good time. And if you can’t get the crudes, like if the Gulf Coast refiners can’t get the heavier crudes, and you have a refinery that can get the light-sweep crudes, it might be competitive advantage. So it’s all pretty complex. It takes a lot of risk, and that’s why these things cost billions of dollars and require 20-year off-take agreements. But there’s a long way to say that if it gets built, it’ll be the first new refinery in decades, and we’ll see if it gets built.
Joshua Rhodes (08:03.534)
Fair enough. So the administration has just ordered a release of oil from the strategic petroleum reserves after the Iranian attacks on shipping. Is this the right tool in a situation like this?
Michael Webber (08:13.346)
The SPR, the Strategic Petroleum Reserve is one of the right tools. It’s actually a tool that was custom designed for this exact situation. After the supply cutoffs in the 70s, happened in the early 70s and late 70s for different reasons, but the same region, the United States and other importing consuming countries all came to realization that there’s a vulnerability depending on a handful of countries for oil if those countries decide not to sell you oil anymore. So that was what led to the creation of the International Energy Agency primarily to coordinate
Michael Webber (08:43.244)
strategic petroleum reserves around the world and coordinate their release. So the SPR was developed first in the seventies and really expanded over a couple of decades for this purpose. And releasing oil from the SPR to settle price spikes or to fill a physical gap of deliveries is exactly what’s designed for. This is the right tool for the job. It’s also not a sufficient tool for the job. Meaning like you’re going to need other tools. Like it’s one of the tools, but we need to think about efficiency and fuel switching and
Michael Webber (09:10.978)
alternative routes for delivery. And there’s all sorts of things we need to do. This is one of the important ones because we can do it quickly. But if there’s a sustained outage or sustained disruption at the Strait of Hormuz, there’s not enough oil in the SPRs around the world to really fill that gap if it’s a multi-month situation. If it’s a few weeks, we’re good. If it’s months or years, we’re going to have to find alternatives.
Joshua Rhodes (09:33.112)
That’s a good point. It’s not only the US has an SPR, they’re SPR’s equivalents around the world,
Michael Webber (09:37.858)
Yeah, China, Japan, lot of European nations. United States has a very big one, so ours is very relevant. And just the announcement that the United States and other countries would release some oil kept oil prices down. And that release hasn’t even happened yet, I don’t think. It takes a while to get the oil out. But just the announcement itself was enough to calm markets a little bit.
Joshua Rhodes (09:55.416)
got it. You know, whenever gasoline prices spikes, sometimes there’s political calls for the US to restrict oil exports. And we’re hearing that again, like we’re talking about stopping oil exports. given what we talked about just a minute ago, would banning exports actually do anything or lower prices?
Michael Webber (10:10.894)
I don’t think banning exports would lower prices and it’s really kind of amazing to have President Trump say that oil and gas industry does not want that solution. Right. And he presents himself as like a friend of the oil and gas industry and they’re like, okay, that’s not the statement we want you to make. So I think economists don’t like that idea. think national security people don’t like the idea. The oil and gas industry doesn’t like it. I think in the end it wouldn’t even work. Frankly, we tried that after the 70s. We put a ban on exports and that wasn’t the appropriate solution. That would have been better just to increase domestic production or
Michael Webber (10:39.424)
implement more efficiency to reduce consumption. I don’t think that will actually become policy, his announcement to ban exports. I think there’s too much resistance, but you never know these days.
Joshua Rhodes (10:48.502)
Yeah, fair enough. You know, argue that in the op-ed that deploying more wind, solar, and batteries can actually strengthen national security in times like these. How does building more renewables help in a crisis like this?
Michael Webber (10:58.734)
There are a couple of things about renewables that are really handy for something like this and primarily in the power sector, if we look at wind and solar, they displace our demand for natural gas, which means we have more natural gas we can export to global markets. Gas prices are going up because LNG is disrupted as well. LNG is a liquefied natural gas and Qatar in the Middle East is a major LNG exporter. If they can’t get their LNG to market, then global gas prices will go up. Our domestic gas prices are lower than the global price, but they’ll be affected by that a little bit.
Michael Webber (11:27.67)
If global price has gone up and we consume less gas here, that frees up some volumes for us to export. So we can sell it to our friends in Europe or Asia and help out our ally while also making a handsome profit. So it’s a good moneymaker for us. The more wind and solar we have in the grid, the more gas we can sell. We also have coal in the grid. We’re mostly shutting down coal, but coal can ramp up for months or years at a time to help offset some of the gas needs as well. But it’s hard to build a new coal plant.
Michael Webber (11:54.764)
Meanwhile, we’re building a lot of wind and solar. So wind and solar is immediately a benefit in terms of freeing up how much gas we use, but it also is something we can build on the order of 18 months to 24 months to get new construction in place. It doesn’t take 10 years to build the way it does for nuclear, for example. So we can ramp up on this production if we think this is going to be a sustained disruption.
Joshua Rhodes (12:14.476)
Yeah, one of the things you and I were talking about the other day is like the possibility for high oil prices to actually incentivize more or potentially lower natural gas prices because a lot of natural gas production, particularly in Texas, is associated with oil. And so the higher the oil price, the more oil production, maybe the more gas it gets, but then maybe the more exports. Do we know which where that falls?
Michael Webber (12:35.628)
All of it, everything you say is possible. So these price spikes might lead to a glut, which leads to low prices. That might be a uniquely American situation because we have so much domestic production. But if we take what you said and carry through, there’ll be high oil prices, which means we’ll drill more. So we’ll get more oil. We’ll produce more gas, which will lead to a supply glut, which leads to lower gas prices. But there are also high gas prices and those high gas prices will lead us to build more wind and solar to use less gas, which means there’s even more of a gas glut.
Michael Webber (13:05.294)
So the high gas prices and the high oil prices might simultaneously lead to more gas production in the United States and less gas consumption, which will then lower the prices. And this is the problem with oil and gas. The world is, it’s kind of complicated because high prices will bring on the solutions to the high prices, which will lower prices and the solutions are less consumption, more production. But low prices will also lead to higher prices because if you have low prices, you’ll produce less but consume more.
Michael Webber (13:33.868)
and eventually you get a scarcity situation, prices go back up. So it’s hard for me to really anticipate, but the geographic tension with the United States is the West Texas oil will be produced getting associated gas kind of for free, but the shale production say in Pennsylvania is really just gas. And so as we’ve been drilling less for oil in the last year, one of the consequences of the Trump administration is less oil drilling. We’ve been doing more gas drilling in Pennsylvania.
Michael Webber (14:00.094)
And then the question is like, okay, in a high oil and gas price environment, do those drilling rigs come back to Texas to produce oil, giving you gas for free? Because it’s associated gas? Or do they stay in Pennsylvania and keep drilling gas because gas prices are high? Or do we just do more drilling of everything, right? All of these things are possible. But I think any way you slice it, probably our prices are lower than in Europe and Japan. But whether prices collapse again, that’s hard to predict unless there’s like some real global economic collapse and then prices will drop for sure.
Michael Webber (14:30.018)
But yeah, I think you’re exactly right that higher prices for oil will lead to more oil production, which leads to more associated gas. If you can get that gas to market because of new pipelines, in which there are some, then gas prices should stay relatively mild and won’t spike as much.
Joshua Rhodes (14:43.98)
fascinating. You know, one of the things that I’ve kind of always said about energy is like, no one really wants energy, they want the things that energy gives us, right? And so I was talking the other day or conversing with folks online about if you want to be insulated against high gasoline prices, then get an electric vehicle. And some of the things we’ve been talking about, like a lot of those fuels like natural gas and renewables that kind of flow into the electricity sector, is that the right argument to make? Would that make us more resilient against these types of events?
Michael Webber (15:09.71)
Absolutely. So I think the technologies to consider are not just wind and solar or more domestic oil and gas production. It’s also in the consuming appliances and electric vehicles are a classic example of this. By using electric vehicle, I reduce my exposure to gasoline prices. Like I just don’t have exposure to gasoline prices. Right. But I do have exposure indirectly to natural gas prices in the power sector. So if the higher oil prices are accompanied by higher gas prices, which seems to be happening to run by gas, I natural gas, not gasoline.
Michael Webber (15:38.57)
If natural gas prices are higher, then power prices should be higher, which means mileage of vehicle will have some exposure. But what we find is electricity price spikes are not anywhere close to the same thing as the wholesale commodity price spike. So crude oil and natural gas and gasoline prices can really spike. They can go up by factor of two or in some cases factor of 100, like in Winnerstorm, URI. But retail electricity prices don’t spike.
Michael Webber (16:03.586)
we have a rate making process that protects consumers, especially retail residential consumers, which is who most of us are when we’re charging up our electric vehicles. We don’t have price spikes. And so even though the wholesale price for electricity might be going up because the wholesale price for gas has gone up, the price you and I pay to charge up electric car probably has not spiked. So we’re protected through a rate making process. So it is a great hedge against this. And my costs for my car aren’t gonna go up with these price spikes.
Michael Webber (16:31.114)
If they happen for years, maybe it’ll take a while to adjust the rates. But I think it’s a great individual level hedge we can make. You could say the same thing about electric heat pumps instead of natural gas furnaces and electric cooktops instead of gas burners and things like that. By going electric and having a rate making process that’s designed to reduce exposure to high price spikes, we’ll be fine.
Joshua Rhodes (16:53.388)
Yeah, and I always think about there’s really only one one economical way to make gasoline and diesel is using oil, but there’s like dozens of ways to make electricity.
Michael Webber (17:02.7)
Yeah, it’s got a built-in diversification, a built-in hedge, right? It breaks the monopoly of any one particular fuel or technology, which means that the consumers have power on this, not just the producers, which is really handy. And if you look at transportation, light duty vehicles in particular have been dominated by gasoline historically in the United States, heavy duty trucking dominated by diesel and planes dominated by jet fuel. They can’t electrify or find alternative fuels very easily.
Michael Webber (17:28.886)
At our home with our electrons, we have so many choices, some of which are on a rooftop or our backyard, some of which are at the local utility, maybe dozens or hundreds of miles away, but we get a lot of options and that’s a nice built-in hedge for these kind of uncertain times.
Joshua Rhodes (17:41.902)
is interesting about the timing of this and like how long things may go. There’s already political unrest around like rising cost of energy. And so as we’re kind of heading into like a political season, is this going to be a big player? Is it going to be a big impact?
Michael Webber (17:54.69)
I think it will be. think the electricity affordability crisis is already a political issue. I think it will remain a political issue for the elections in November because I expect prices to be high for months. Even if prices aren’t high for months, the lingering memory of it will show up at the ballot box is what I expect. That was one of the main reasons that Trump won. He ran on a platform of affordability. He used that to beat up on his opponent, Kamala Harris, and that was successful. So think a lot of people will take a page from that playbook and say, okay, well,
Michael Webber (18:24.054)
running on affordability of eggs or milk or other food items, but also energy will be something that I expect candidates to run on. We’ve seen it already a little bit. There was an election a year ago, so in Georgia, where the statewide elected official for the public service commission, like the Public Utility Commission in Texas, was thrown out of office because of concerns around electricity rates. And usually the statewide commissioner positions are not one that people pay lot of attention to politically, but...
Michael Webber (18:50.728)
That was when we’re like, they flip the party and throughout the incumbent, all this kind of stuff. So clearly there was some anger there and that might be a preview of what’s to come. And we don’t often get to vote on the commissioners themselves who regulate energy. Some states do, some states don’t. And so I think if people are grumpy, they’ll take it out on whatever people they can vote for or vote against. So I think it will be an issue. think it is an issue. think it’s already showing up at the ballot box. I don’t expect that to change by November.
Joshua Rhodes (19:14.154)
Okay,
Joshua Rhodes (19:14.465)
last question. If you were advising policymakers right now, what’s the single most important energy policy decision that they can make?
Michael Webber (19:20.366)
I think the best thing we can do right now is permitting reform to get more stuff built quickly. These supply disruptions and price spikes are a reminder that being able to have your own supply, which means your ability to build things, which could be power plants or oil and gas production or pipelines or transmission lines, all of that is important. So we got to get things built. And another thing, if I can take a second point, just say we’ve actually had some pretty good success the last 20 years, increasing domestic production of oil, gas, wind and solar, batteries, things like that, and reducing consumption.
Michael Webber (19:49.374)
Our consumption per person and per dollar of unit of economic activity are down because of efficiency. So let’s keep the successes going. Let’s not give up on the things that have been working for us. And let’s get a lot more things built.
Joshua Rhodes (20:01.166)
I’m Michael Weber. Thank you for coming on the Energy Capital Podcast.
Michael Webber (20:03.751)
Thanks for the real-time current offense discussion.
Joshua Rhodes (20:06.67)
Absolutely, it was great.
Joshua Rhodes (20:10.126)
Thanks for listening to the Energy Capital Podcast. If today’s conversation helped you make better sense of how the energy system actually works, share the episode with a colleague and hit follow on your podcast app. You can find us on Apple Podcasts, Spotify, and all the usual platforms. For deeper analysis and context each week, subscribe to the Texas Energy and Power at texasenergyempower.com. That’s where you’ll find every episode, every article, and our latest updates. We’re also on LinkedIn, X, and YouTube.
Joshua Rhodes (20:39.48)
where we share clips, insights, and ongoing commentary on energy policy, markets, and the grid. Before we go, a quick note. The views expressed on this podcast are my own and do not represent the official positions of the University of Texas, Ideasmiss, Austin Energy, or Columbia University. A big thanks to Nate Peevee, our producer. I’m Joshua Rhodes. Thanks for listening, and we’ll see you next time.
