Chevron CEO warns depleted fuel buffers leave global energy markets exposed heading into winter

Every significant buffer the global oil market has relied on to absorb shocks — commercial inventories, government strategic reserves, and even sanctioned barrels — has now been drawn down, Chevron CEO Mike Wirth warned Wednesday, leaving fuel markets unusually exposed to disruption as winter demand approaches.

Those are all buffers in the system that have bought us time, but they've been drained. And so, we're at much lower levels of inventory right now and it makes the system more vulnerable to disruption.— Mike Wirth, CEO, Chevron

Wirth made the remarks in an exclusive interview on CNBC's 'Squawk Box Europe,' describing the global inventory position ahead of winter as a 'very serious' situation. He explained that the year had begun with ample cushions on multiple fronts — high commercial stocks held by companies, large strategic reserves held by governments, and significant volumes of sanctioned oil sitting on the water — but that all three have since been consumed by the disruptions caused by the U.S.-Iran war.

The conflict has severely disrupted shipping through the Strait of Hormuz, a narrow waterway that typically handles around 20% of the world's oil and liquefied natural gas supplies, according to CNBC. The partial closure has slowed the movement of tankers carrying gas and diesel, and gas prices have risen by $1.23 as global fuel supply has tightened, according to The Sun.

Wirth's warning lands as Saudi Arabia and Iran-backed Houthi forces continue to exchange attacks, keeping energy market participants on edge even as rising Middle East crude exports and an emergency G7 stockpile release have offered some temporary relief, according to CNBC.

Saudi Aramco CEO Amin Nasser said earlier this week that it could take up to two years to rebuild global oil inventories, and warned that the supply squeeze could worsen as the U.S.-Iran war continues, according to CNBC.

Against that backdrop, President Donald Trump has proposed an export ban on diesel as a way to bring down record-high fuel costs for American drivers. Wirth pushed back directly, arguing the policy would do the opposite.

Export bans, be they in the U.S. or in other countries, actually take supply off the global market and they run the risk of making the situation worse.— Mike Wirth, CEO, Chevron

The U.S. has been a reliable supplier to the world at a time when it needs it. And I think it would be unwise for the U.S. to create questions in the minds of our allies and our partners as to whether or not we will be there with reliable supply when times are difficult — and so, there are other options.— Mike Wirth, CEO, Chevron

According to CNBC, Trump has since cooled on the export ban after G7 countries agreed to release diesel and crude oil from their emergency reserves. Instead, Trump signed an executive order Monday to temporarily allow truckers and farmers to use red-dyed diesel — a tax-exempt fuel normally restricted to farm equipment, construction machinery, and other off-road vehicles — and deferred related taxes on that fuel through the end of the year. The tax exemption amounts to 24.4 cents per gallon that is ordinarily applied to diesel sold for highway use.

On longer-term supply, Wirth pointed to Chevron's expanded bet on Venezuela. The company recently pledged to more than double its oil production there over the next five years, targeting 600,000 barrels per day by 2031 as part of a $7 billion investment, up from roughly 280,000 barrels per day currently. But Wirth was careful to frame the contribution in context.

Venezuela is coming off a relatively low starting point — there has not been much investment in the country. We have a good position there that we intend to grow, but that takes time and the amount of production that Venezuela can add over the next short period of time is dwarfed by the amount that is at risk in the Middle East.— Mike Wirth, CEO, Chevron

For American drivers, the immediate picture is one of elevated prices with limited near-term relief. The buffers that kept the market from feeling the full force of the Strait of Hormuz disruption have been spent. What happens next depends heavily on whether the conflict escalates further — and on whether the policy responses, from emergency reserve releases to the red-dyed diesel order, prove sufficient to hold prices in check through the winter.

Why it matters — With every major supply buffer now drained and the Strait of Hormuz still disrupted, American drivers and the broader global economy face a winter in which any further shock — military, weather, or logistical — could push fuel prices significantly higher with no cushion left to absorb it.

Reported by the-sun.com, reuters.com, cnbc.com