Amos Hochstein dubs oil prices 'wrong and too low': find out more

Former White House senior advisor Amos Hochstein has issued a stark warning on energy markets, calling current oil benchmarks “wrong and too low” despite WTI and Brent trading over $100.

In an interview with CNBC this morning, the former diplomat – who is now with TWG Global as a Managing Partner – said paper market prices fail to reflect severe “real-world supply disruptions” across key global transit bottlenecks.

Divergence between paper prices and physical oil market

According to Hochstein, physical crude is selling at massive premium, with geopolitical hostilities, depleted reserves, and impaired refining infrastructure leaving global energy markets “drastically” underpricing the true extent of incoming supply shocks.

He emphasized that headline exchange futures materially underestimate the actual tightness across physical energy markets, adding physical crude transactions globally are fetching rather steep spot premiums ranging between $120 and $150 per barrel.

This massive gap is driven by rapidly dwindling Strategic Petroleum Reserves, which limits flow-rate flexibility and leaves global supplies without a safety net.

Plus, retail product prices paint a far more severe picture – diesel trading at about $6.20 per gallon historically aligns with $200 crude oil, while average US gasoline prices near $4.30 a gallon often correspond to crude trading between $125 and $130 per barrel.

Compounding Middle East disruptions and infrastructure attacks

The pricing mismatch is further exacerbated by escalating supply bottleneck break-downs across major Middle Eastern transit corridors.

With the Strait of Hormuz virtually “non-functional” and the Bab el-Mandeb strait under Houthi control, key maritime bypasses have collapsed.

A recent drone strike disabling Saudi Arabia’s East-West pipeline, a key bypass capable of moving 7 million barrels per day to the Red Sea, has removed another critical “relief valve” for regional exports.

Additionally, refined petroleum products from major Gulf producers such as Kuwait, Saudi Arabia, and the UAE are unable to exit the region at normal volumes, leaving global refining hubs severely constrained without immediate operational resolution.

Global refining deficits and Russian export halts

The systemic squeeze extends well beyond crude transit into global refining infrastructure, where capacity deficits continue to compound.

Ukrainian strikes on strategic Russian refining facilities have permanently knocked out substantial capacity, shifting Moscow from a key supplier that once accounted for 11% of global diesel exports into a net importer.

According to Hochstein, this structural deficit means lost refining output cannot easily be restored even if geopolitical risks subside.

With primary supply buffers depleted and alternative bypass routes knocked offline, energy markets remain severely exposed to further upward price shocks.

Consequently, analysts warn that without swift intervention or emergency route restoration, paper futures will inevitably be forced to catch up with spot physical reality, triggering unprecedented cost pressure on global transport networks and consumer economies alike.