The Sour Crude Problem: Why America’s Refineries Depend on Imports and Why It is Relevant to the Strait of Hormuz

10 July 2026 by Larry C. Johnson

Oil refinery

The US/Israeli war with Iran has focused the world’s attention on oil because of the closure of the Strait of Hormuz. When the war started I thought oil was just oil. Okay… I was ignorant. But over the course of the last four months I have received quite an education from a couple of different experts in the field. If you want to understand one of the key reasons that Donald Trump signed the MoU, you need to understand why the US is dependent on sour crude oil, which comes out of the Persian Gulf. I will try to make it simple — About 65% of the US refineries are built to handle sour crude while the US oil industry primarily produces sweet crude. We need sour crude to produce diesel and aviation fuel. The closure of the Strait of Hormuz means that the US will not have enough sour crude to sustain current production levels of diesel and aviation fuel. That’s the problem in a nutshell.

The United States is the largest crude oil producer in the world, pumping close to 13.8 million barrels per day. It is also, paradoxically, structurally dependent on imported crude oil — roughly 6 to 8 million barrels per day of it in recent years. The war with Iran and the months-long closure of the Strait of Hormuz exposed this paradox in the starkest possible terms: a country awash in its own oil found itself draining its Strategic Petroleum Reserve at record rates to keep diesel and jet fuel flowing. The explanation lies in a mismatch between the kind of oil America produces and the kind of oil its refineries were built to run — and the barrel now bridging that mismatch is being pulled from salt caverns with a finite structural lifespan.

Not All Crude Is Created Equal

Crude oil is classified along two principal axes: density (American Petroleum Institute aka API gravity) and sulfur content. “Light” crudes have high API gravity (roughly 35° and above); “heavy” crudes are denser. “Sweet” crude contains less than 0.5 percent sulfur by weight; “sour” crude contains more — the SPR’s own specification defines sour as between 0.5 and 2.0 percent sulfur.

The shale revolution that transformed the United States into the world’s top producer of almost exclusively light, sweet crude. Permian, Bakken, and Eagle Ford barrels typically run 40–50° API with minimal sulfur. That is excellent oil by most measures — easy to process, rich in gasoline-range molecules. But it is not what the American refining complex was designed to process.

The Refinery Mismatch

From the late 1980s through the 2000s, US Gulf Coast refiners invested tens of billions of dollars in “deep conversion” capacity: coking units, hydrocrackers, fluid catalytic crackers, and hydrotreaters. These investments were made on the near-universal expectation that domestic production would keep declining and the import slate would keep getting heavier and more sulfurous — Mexican Maya, Venezuelan Merey, Saudi Arab Medium, Canadian bitumen blends. Complexity was the competitive moat: a refinery that could buy discounted heavy sour feedstock and still produce a full slate of clean products earned wider margins than a simple refinery running expensive sweet crude.

The shale boom arrived after that capital was already in the ground. The result is the US refining system is optimized for medium and heavy sour crude in a country that produces light sweet crude. Running a coking refinery on a pure light-sweet diet leaves the coker and the resid-upgrading units underutilized — destroying the very margin those units were built to capture — and creates operational problems, since very light crude overloads the naphtha and light-ends handling at the front of the plant. Nor can refiners simply blend their way out: mixing very light shale crude with heavy residues produces “dumbbell” blends that mimic a medium crude on paper but misbehave in the distillation tower, because the blend lacks the middle-boiling-range molecules that a genuine medium crude contains.

This is why the trade pattern looks the way it does. The United States exports roughly 4 million barrels per day of light sweet crude to refineries in Europe and Asia configured for it, while importing millions of barrels per day of heavier, sourer grades. Canada and Mexico supply about 70 percent of U.S. crude imports — Canadian heavy sour arrives by pipeline into the Midwest and Gulf Coast, a flow that hit records after the Trans Mountain expansion — with Saudi Arabia, Iraq, and, since the US kidnapping of Maduro, a resurgent Venezuela supplying much of the balance. This arrangement is not an accident or a policy failure in the ordinary sense; it is the rational outcome of a refining system whose configuration cannot be changed quickly or cheaply. With Saudi Arabia out of the picture, the US is forced to rely on a rapidly shrinking SPR.

So far the Trump administration has been able to postpone a supply crisis by drawing down the sour crude from the SPR. But the US will soon drain the SPR of the sour crude and will need an alternative… That means getting the Persian Gulf oil flowing back to America. Some experts believe that the shortage of sour crude will produce a spike in the price of diesel and aviation fuel as early as mid-July. Others believe the US can hang on until the middle of August. As long as the US continues to attack Iran, the prospects for a return to normal remain dim.

Another busy podcast day. I started off with Jim Webb. Please support his channel, he does a great job: https://www.youtube.com/watch?v=AFisr1Qscls