JUANA SUMMERS, HOST:
President Trump is addressing the nation this evening to discuss the war in Iran. In the last few days, he's said that the U.S. may, quote, "leave Iran within weeks," whether or not the Strait of Hormuz has been reopened. But he's also sent some contradictory signals. A lot's on the line for the global economy, and NPR's Camila Domonoske joins us now to talk about the scenarios. Hi there.
CAMILA DOMONOSKE, BYLINE: Hey.
SUMMERS: So just start by telling us, Camila, what is actually happening in the Strait of Hormuz now?
DOMONOSKE: Yeah, it is still mostly closed. There are a small number of ships that are going through. Iran is allowing them passage, but it is a small fraction of the normal traffic. And, you know, maybe people have heard me say this by now, but normally about a fifth of the world's oil and liquefied natural gas passes through this narrow waterway, right? Another thing that is happening is Iran has floated the idea of charging a fee for passage through the strait, which would certainly be new. Overall, the strait is a huge source of leverage for Iran, and it is incredibly important in this conflict.
SUMMERS: And we've seen that oil prices have been really reeling from the closure of the strait. So what does it mean for energy markets if the U.S. withdraws while the strait is still closed?
DOMONOSKE: Yeah, it would really depend on what might happen after the U.S. leaves. So one scenario - right? - is that maybe the strait remains mostly closed. And what that means for global oil markets, well, Al Salazar is the head of macro oil and gas research at the data company Enverus - he puts it this way.
AL SALAZAR: We found that for basically every month that this, you know, varies in terms of our Hormuz closure, there's about a 15 - 10- to $15 move in our forecast.
DOMONOSKE: So for every additional month it's closed, they are expecting oil prices to go up 10- to $15 a barrel. Higher crude prices don't just affect what you pay for gasoline. It changes the cost of shipping things, which drives up the cost of everything, inflation. Susan Spence regularly surveys factory managers for the Institute for Supply Management, and she says higher fuel prices are already driving up costs everywhere.
SUSAN SPENCE: Anything that travels, whether it's over the road in the U.S. or ocean freight, it's going to increase.
DOMONOSKE: And that's just the higher prices related to fuel. There are other things stuck behind the strait right now - fertilizer, helium, sulfur, plastics, aluminum. They all have economic impacts.
SUMMERS: OK. And you mentioned that that is one scenario. Tell us about others.
DOMONOSKE: Well, a second scenario is maybe the strait reopens for business, right? And there is a lot of hope for that at the moment. We saw oil prices drop really sharply after President Trump talked about the U.S. leaving the war soon. Of course, prices are still higher than pre-war, and it would take time to recover, even with a full reopening. But it would be possible for that to happen, for prices to come back down. Or scenarios three, four, five, etc., maybe it is something somewhere in the middle. Iran controls the strait right now. They could do any number of things that are incredibly hard to predict. And, you know, just that uncertainty alone could push oil prices higher for longer.
SUMMERS: Well, is there anything that the U.S. can do to insulate consumers from these higher prices?
DOMONOSKE: Yeah, the government has already pulled a lot of levers, things like tapping into stockpiles and waving the Jones Act, which makes it easier to move oil and gasoline between U.S. ports. But these things cannot fully make up for the shortfall in oil markets. Now, it is true, as the president has said, that the U.S. being a huge oil producer is very helpful in this moment. It means there aren't shortages in the U.S. like some places in Asia are experiencing, but Americans are not fully insulated from price spikes. Everyone I have talked to about oil in the last month agrees that there is no substitute for fully reopening the strait, which sometimes President Trump seems to have as a top U.S. priority, and sometimes he suggests it should be someone else's problem to solve.
SUMMERS: NPR's Camila Domonoske, thank you.
DOMONOSKE: Thanks.
SUMMERS: And our colleague, NPR's Scott Horsley, contributed to this report. Transcript provided by NPR, Copyright NPR.
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