International oil prices have surged significantly due to the U.S.-Iran conflict. According to the latest reports on Wednesday, the International Energy Agency (IEA) is planning to propose the largest-ever release of strategic crude oil reserves, potentially exceeding the 182 million barrels released during the 2022 Russia-Ukraine conflict. G7 leaders are scheduled to hold an emergency conference call.

However, Natasha Kaneva, Head of Global Commodities Strategy at J.P. Morgan, stated bluntly in a recent report that unless the safe passage of the Strait of Hormuz is guaranteed, the impact of all policy tools on oil prices will be very limited. This is because potential supply losses over the next two weeks could reach as high as 12 million barrels per day.

J.P. Morgan indicated that the U.S. administration is reviewing multiple plans to suppress oil prices, including restricting U.S. exports, intervening in the oil futures market, exempting certain federal taxes, and suspending requirements of the Jones Act. The administration has stated that the U.S. has a buffer "well beyond a 4 to 5-week timeframe" and suggested that "the war could end soon," which has further pressured oil prices.

But J.P. Morgan believes that while short-term policy "verbal intervention" can suppress market sentiment, the structural supply gap far exceeds the practical coverage capacity of policy tools. Whether the Strait of Hormuz can resume safe passage is the true key variable determining the direction of oil prices. Until the situation becomes clear, high volatility in the energy markets will persist.

**First Option: Release Strategic Petroleum Reserve (SPR) – A Drop in the Bucket** G7 governments are discussing a coordinated release of 300 to 400 million barrels of strategic reserves under IEA coordination. J.P. Morgan estimates that participating countries could collectively achieve a release rate of approximately 1.2 million barrels per day, but this falls far short of compensating for the potential supply gap.

Key data points: - Total OECD strategic reserves: 1.247 billion barrels, comprising 935 million barrels of crude oil and 312 million barrels of refined products. - Current U.S. SPR status: Approximately 415 million barrels, about 58% of storage capacity, with physical limitations on salt cavern integrity and extraction rates. The actual release rate is likely to be lower than the 2022 average of 1 million barrels per day. - Statutory floor: Congress mandates a minimum SPR inventory of 252.4 million barrels. The President can exceed this limit by declaring a "severe energy supply interruption" (a power invoked by the previous administration in Spring 2022 to trigger 180 million barrels in sales). However, the practical operational floor is around 150-160 million barrels to maintain salt cavern stability. - Implementation lag: After a presidential order is issued, the Department of Energy needs about 13 days to complete contract awards and begin deliveries, with additional transportation time required to reach end consumers. - The historical peak emergency release from the OECD was about 1.4 million barrels per day. Even achieving a release rate of 1.2 million barrels per day would be a drop in the bucket compared to a potential supply loss of 12 million barrels per day over two weeks.

**Second Option: Restrict U.S. Exports – Short-Term Price Suppression, Long-Term Backfire** The administration has the authority to restrict crude oil and refined product exports under a national emergency, using legal tools such as the International Emergency Economic Powers Act (IEEPA), the Energy Policy and Conservation Act, and the 2018 Export Control Reform Act.

Since the crude oil export ban was lifted in 2015, the U.S. has become one of the world's largest suppliers, exporting about 4 million barrels of crude oil per day, plus significant volumes of diesel, gasoline, and other refined products to Europe, Latin America, and Asia.

- Short-term effect: Restricting exports would "trap" barrels of crude within the U.S., depressing domestic prices. - Long-term risk: A sharp reduction in international market supply would cause immediate shortages for overseas refineries, significantly driving up international benchmark prices. Simultaneously, lower realized prices for U.S. producers would discourage drilling activity, further tightening global supply-demand balance and ultimately creating upward pressure on both global and U.S. oil prices.

**Third Option: Waive the Jones Act – More Effective When Combined with SPR Release** The Jones Act (Merchant Marine Act of 1920) requires that goods transported between U.S. ports be carried on ships that are U.S.-built, U.S.-flagged, and crewed by U.S. citizens. The executive branch can grant temporary waivers for national defense needs or emergencies, a power invoked several times after major hurricanes to allow foreign-flagged tankers to transport fuel between U.S. ports.

- Policy combination effect: Combining an SPR release with a temporary Jones Act waiver would make the policy more effective. Without a waiver, limited U.S.-flagged tanker capacity would constrain the speed at which SPR barrels reach key refining centers or supply-short regions.

**Fourth Option: Suspend Federal Fuel Tax – Requires Congressional Legislation, Difficult to Implement** The federal gasoline tax is 18.4 cents per gallon, and the diesel tax is 24.4 cents per gallon, both funding the Highway Trust Fund. A full suspension of the federal fuel tax almost certainly requires legislation passed by Congress and signed by the President. The executive branch can only provide limited administrative relief (such as payment deferrals) in emergencies.

- In contrast, state governments have more flexibility. Several states temporarily suspended state-level fuel taxes during the 2022 price surge. State fuel tax rates range from about 15 cents to over 50 cents per gallon. A suspension can provide short-term price relief for consumers but simultaneously reduces revenue earmarked for transportation infrastructure and road maintenance.

**Fifth Option: Ease E15 Gasoline Blending Rules – Overall Limited Impact** The Environmental Protection Agency (EPA) can grant emergency waivers under the Clean Air Act to allow nationwide sales of E15 gasoline (containing 15% ethanol) during the summer driving season, when it is normally restricted due to air quality regulations. This measure could modestly expand the gasoline supply pool by allowing higher ethanol blends, alleviating some price pressure at the pump, but the overall impact is limited.

**Sixth Option: Ease Reid Vapor Pressure (RVP) Standards – Slightly Better Than E15, But Still Modest** An RVP waiver allows refiners to sell gasoline meeting winter specifications for a longer period during the summer, directly increasing the total volume of fuel that can be legally sold. The EPA can temporarily ease RVP restrictions under the Clean Air Act, enabling refiners to quickly increase supply using existing inventory and simpler blending processes.

- The effect is slightly better than easing E15 rules – typically alleviating regional shortages and reducing prices by a few cents per gallon – and works faster than other regulatory adjustments because it directly increases salable gasoline volumes. However, the overall impact remains modest.

**The Real Key: When Will the Strait of Hormuz Reopen?** J.P. Morgan's conclusion is pointed: Until safe passage through the Strait of Hormuz is secured, the impact of all the aforementioned policy measures on oil prices will be very limited.

The current situation is as follows: - The U.S. Maritime Administration (MARAD) canceled its advisory over the weekend that had recommended commercial vessels avoid the Strait of Hormuz and Persian Gulf (the advisory was originally set to last until March 13th). However, this is only a necessary condition for resuming transit, not a sufficient one. - The U.S. Navy and Central Command (CENTCOM) have not yet announced the Strait is open for safe passage, and there is no evidence of mine-sweeping or convoy plans. - The Secretary of Energy declined to provide a specific timeline for reopening on Sunday, acknowledging that military convoys had not yet begun. - Aircraft carrier deployment status: The USS Abraham Lincoln remains in the Arabian Sea conducting strikes against Iran; the USS Gerald R. Ford is transiting the Red Sea; a third carrier, the USS George H.W. Bush, completed pre-deployment training last Thursday. If ordered to depart immediately, it would take approximately 10-12 days to reach the broader Middle East region. - The French Navy will also participate in defensive operations to reopen the Strait. The aircraft carrier Charles de Gaulle arrived in Cyprus on Monday. The French President stated that a Hormuz convoy mission would only be feasible after the most intense phase of the war. - The current U.S. strategic focus is on degrading Iran's asymmetric warfare capabilities that threaten commercial shipping. Only once these disruptive capabilities are sufficiently suppressed, combined with U.S. Navy convoys and government-backed insurance guarantees, can confidence be restored for commercial tankers to transit the Strait of Hormuz. A formal statement from the U.S. Navy or CENTCOM declaring the Strait of Hormuz safe for passage, coupled with the substantive initiation of convoy operations – that is the true trigger for a turning point in oil prices.