Dear Reader,

Two Saudi oil tankers are burning in the Red Sea right now. The Houthis claimed the strikes. Trump threatened to hold Iran personally responsible. The war between Israel, the U.S., and Iran has now entered its fifth month.

Brent crude just dropped 6.6% in a single session.

That is not a typo. The war premium is evaporating. Today I want to show you exactly why, and who collects the toll no matter what happens next.

Inside today's issue:

The Barrel

On July 22, Houthi forces struck two Saudi oil tankers in the Red Sea. The Encelia. The Layla. Fires broke out on both vessels. Three days later, Houthis claimed strikes on a Saudi oil refinery inside Saudi Arabia itself. The conflict that started in the Strait of Hormuz has now reached Saudi ports directly.

Brent crude was trading above $100 a barrel last week. Monday, it dropped 6.6% to $85.63. The reason is not complicated, but most of the coverage misses it entirely.

The EIA just released their updated outlook. Global oil consumption falls 1.2 million barrels per day in 2026. The Strait of Hormuz closure hammered Asian demand hardest. Saudi Arabia cut production to 6,637 thousand barrels per day in June, down from 7,010 the month before. Even the Saudis are adjusting to demand that is no longer there.

High prices kill demand. War creates high prices. The market is telling you the demand damage costs more than the supply disruption gains back. That is why oil fell while tankers burned.

The Grid

While oil prices head down, electricity prices head up. That gap is where today's real opportunity lives.

PJM Interconnection runs the largest grid in the United States. It covers 13 states and 65 million people. On July 2, PJM issued emergency orders giving them authority to force data centers with 50 megawatts or more of peak load to switch to backup generators within 15 minutes of a grid emergency signal.

Here is the number behind that order: PJM capacity prices were $28.92 per megawatt-day in 2024. They stand at $329.17 today. That is more than a 10x increase in two years. Data centers are responsible for most of the increase. They have added $6.5 billion to the cost of securing power supply in the most recent auction cycle alone.

Total data center-related procurement costs for 2025 through 2028: $23.1 billion. The grid was not built for this demand. It is being rebuilt in real time, at enormous cost.

The Policy Desk

The Federal Reserve delivers its rate decision today at 2pm Eastern. Chairman Kevin Warsh is expected to hold rates at 3.65%. Markets give near-zero probability to a move today.

But September is a live question. Higher energy prices from the Strait disruption complicated the inflation picture. Experts put the odds of a September hike at 40%. That is not consensus, but it is not noise either.

Meanwhile, Netanyahu arrived at the White House yesterday for his first in-person meeting with Trump since the Iran offensive launched in February. Five months in. No clear exit. Trump reportedly frustrated at a war that was promised as quick.

There is a number buried in today's FOMC projections that almost nobody is talking about. It points directly at one class of energy assets that collects regardless of what Warsh announces at 2pm.

I will get to that after a quick word from our partners.

SPONSORED: PORTER & CO

Investor Angle

That number is $329.17.

That is what PJM now charges per megawatt-day to guarantee power capacity for the coming year. Two years ago it was $28.92. The same poles and wires. The same grid. What changed is the demand load from data centers, AI compute, and around-the-clock industrial electrification.

Oil goes up. Oil goes down. But the data center cannot go dark. The AI model trains at 3am. The hospital does not power down its imaging equipment because crude fell 6% on Monday. The demand is inelastic. And inelastic demand is where energy infrastructure wealth is being built right now.

The players who collect that $329.17 are not oil producers exposed to demand destruction. They are the transmission owners, the peaker plant operators, the LNG terminal owners, and the companies now under contract to build dedicated generation for data center campuses in Virginia, Ohio, and Texas.

These companies do not care if Warsh raises rates or holds. They do not care if Brent is $70 or $110. They collect the capacity tariff, the transmission fee, the throughput rate. Every time.

The war premium in oil is evaporating because demand destruction is real. The capacity premium in the grid is not going anywhere. That is where the next infrastructure wealth cycle is building today.

Watch the grid, not the oil price.

Chris Carroll

Publisher, Money, Power and Profit

P.S. The governments of Saudi Arabia and Kuwait once hired our friend Larry Benedict. So did the banks that hold money for Exxon, Chevron, and Shell. For decades, he helped the most powerful players in oil grow their money. Now he is revealing his top oil strategy, adapted so ordinary folks can use it too. Watch the free presentation here.

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