Gas prices, national parks and your IRA

The U.S. political response has been predictable: drill more, open more public lands, cut through the permitting that stands between the United States and energy dominance. The Trump administration declared a national energy emergency on day one, expediting permits for oil and gas drilling on federal lands and initiating a review of rules protecting more than 40 national park units from drilling inside their boundaries.

The problem is that drilling is an answer to a different question. The Strait of Hormuz carries roughly 20 million barrels of oil a day, about 20% of global supply. When it closes, the global market feels it within days whereas a new permit on federal land takes years to produce a barrel. Trump’s own Energy Information Administration projects gas prices won’t fall below $3 a gallon at any point through the end of 2027, even assuming the strait gradually reopens in April. The mismatch between today’s crisis and proposed solution is a matter of clocks, not opinion.

And what is actually happening at the strait is even more interesting. Since March 1, Iran has been running what maritime analysts are now calling a permission-based transit system. Before the war, the strait averaged more than 153 vessel transits per day. As of last week, only 78 vessels had been detected passing through since the closure began. The ships getting through, including Pakistani, Indian, Turkish and some Chinese-linked vessels, are doing so through case-by-case negotiations with Iranian authorities with vessels reportedly required to submit names, IMO numbers, and voyage plans before being granted passage. Western-affiliated shipping remains locked out.

Iran has separately told CNN it is now considering formalizing that system with a financial condition: passage in exchange for oil transactions settled in Chinese yuan rather than U.S. dollars. The global oil trade has been conducted almost entirely in USD since 1974, an arrangement known as the petrodollar system, and that arrangement created a self-reinforcing structural demand for dollar reserves that has underpinned American financial power for 50 years. What Iran is proposing is to turn the world’s most critical energy choke point into a toll booth and to price the toll in a different currency.

China spent two decades building the infrastructure that makes this moment possible. It signed a 25-year, $400 billion cooperation agreement with Iran in 2021. It built the world’s largest clean energy grid, reducing its Hormuz oil dependency to roughly 6% of total energy consumption and by 2024, 84% of China’s electricity demand growth came from clean energy. And it built the payment infrastructure: China’s Cross-Border Interbank Payment System processed the equivalent of $24 trillion in yuan-denominated transactions in 2024, a 43% increase from the year prior. The pipes to settle oil outside the dollar system were constructed well before Feb. 28. China spent two decades building toward less dependence on the system while building infrastructure to support running the global oil trade, and the U.S. response is to literally dig for more oil.

A few weeks ago, I wrote about global central banks diversifying away from U.S. dollar-denominated reserves at historic scale, accumulating gold at levels not seen in decades. The thesis was that the institutions running the global monetary system were repositioning, and American households were the last to know. What’s happening at the Strait of Hormuz is that same shift, but with oil (black gold, as they say). When a permission system determines which ships get through and a yuan settlement condition is being formally considered for the world’s most critical energy choke point, the dollar’s structural role in global energy trade is being negotiated ship by ship in the Persian Gulf.

The drilling argument will keep getting made because $5.76 gas demands an answer, and permits look good on paper. But the real vulnerability is who controls the choke points through which energy moves, and which currency that movement gets priced in. Those are financial, diplomatic and energy infrastructure problems accumulated over years. The permits being debated in Washington are aimed at a different problem, and the one unfolding in the strait is running on an entirely different timeline. Meanwhile, American retirement accounts are denominated in the currency being negotiated away from, and the debate on the news is about drilling in national parks.