Mid-August is meant to be the fortnight when nothing happens and everyone who matters is somewhere else with a view. Instead, the war that closed the Strait of Hormuz stopped pretending to be temporary, the shortage moved from crude to diesel, and the price of a grid connection was settled in three places at once. Texas turned its pause into a queue audit, Britain’s queue ticket turned out to be the most expensive in the world, and America’s largest grid operator asked for the right to say no. One question underneath all of it: who pays, and for how long.
The war stopped pretending to be temporary. The Islamabad Memorandum’s sixty-day window ran out this weekend, and the two sides cannot agree there was ever anything to extend. Reporting sourced to Pakistani officials said midweek that both had agreed a rollover; on Friday Iran’s foreign minister, Abbas Araghchi, said there had been no ceasefire, only an end to a war that has now entered a new phase. What has replaced diplomacy is a siege. The Treasury Secretary briefed that an economic isolation package would follow this week, of a kind “the world has never seen before,” and the Defense Secretary says the naval blockade can be maintained indefinitely. Washington now talks of declaring the strait American territory; Iran’s deputy foreign minister replied that it “has been Iranian, is Iranian and will remain Iranian.” Two more Emirati tankers were attacked midweek, the fifteenth and sixteenth since February, which Abu Dhabi called piracy.
The commercial position behind the rhetoric is more revealing. Iran is reported to be seeking a fee of five to seven per cent on every barrel that transits, worth $18 to $25 billion a year, which Rapidan’s Bob McNally calls extortion and which would void the insurance of any vessel that paid it. Transits run at eight to thirteen a day against roughly 130 before the war, and Eurasia Group’s Gregory Brew says plainly that the strait is never going back to its pre-war status quo. The number that matters for anyone shipping anything is not Brent but war-risk cover. On 22 July, insurance broker Marsh said rates were being quoted at 7.5 to 10 per cent of hull value after renewed attacks, against around a quarter of one per cent before the war. The date matters in a market that moves with every incident; underwriters generally need weeks of quiet before pricing eases.
The shortage has moved from crude to what crude becomes. Brent settled at $88.52 on Friday, up around six per cent on the week and a third on the year, which is uncomfortable but not remarkable. The refined market is remarkable. Global refinery throughput fell to 80.9 million barrels a day in July, nearly five million below a year earlier, and the International Energy Agency reports Atlantic Basin distillate cracks at record levels. The crack spread is simply the margin between what a refinery pays for a barrel of crude and what it earns from the diesel, petrol and jet fuel it turns that barrel into. Bank of America’s Francisco Blanch puts diesel cracks at $80 to $85 a barrel, which is to say the refining margin alone is now worth more than a whole barrel of West Texas Intermediate. Jefferies’ Sam Burwell has the line of the week: the tightness “is manifesting itself in cracks, not crude.” The binding constraint is the plant that turns oil into fuel, not the hole it comes out of.
Gas tells the same story geographically. American gas at Henry Hub closed the week six per cent cheaper than a year ago, while European TTF finished up ninety-eight per cent and Asian LNG up seventy-eight. Nothing in that gap is about molecules; it is about who has to ship them. The same asymmetry shows in power, where German spot prices are up sixty-five per cent on the year and French prices, on a nuclear fleet, are up six. Elsewhere the complex is up about a third year on year, with copper up forty-eight and wheat five per cent on the week alone after strikes on Russia’s Black Sea grain terminals. Gold is up thirty-one per cent and remains around eighteen per cent below the panic peak it reached in January, a reminder that the market has already priced one version of this war and been wrong.
The cost is arriving at the pump, and at the socket. American petrol reached $4.07 a gallon this week and diesel $5.44, up twenty-nine and forty-seven per cent on the year, putting August on course to be the most expensive on record in nominal terms. Trump has proposed a federal fuel-tax holiday through 1 October; Penn Wharton estimates that, if enacted, about 13.2 cents of the 18.4-cent federal petrol levy would reach consumers. Trump made the case at the New York rally for absorbing the wider cost, arguing that paying “a tiny little bit more” is what stops a very evil country getting a nuclear weapon, and “you’re at $4, it’s okay.” Voters are less persuaded: CNN/SSRS has approval of his handling of petrol prices at twenty-one per cent, with only a quarter saying the war has been worth the toll in American lives and dollars. The more durable number is the one that does not move with the barrel. American electricity is inflating at 4.2 per cent against core of 2.5, because the part of the bill arriving by wire and pipe is the part a household cannot drive less to avoid.
Texas turned its pause into an audit of a queue far larger than the state’s grid. The directive ordered disclosures on public subsidy, peak demand, water sourcing, cooling technology, community impact, ownership and, notably, on-site generation and other measures intended to reduce demand on the grid. ERCOT said in June that it was tracking 438 gigawatts of large-load requests, 89 per cent of them from data centres; reporting after the August pause put the total at roughly 474 gigawatts. Those are prospective requests, not committed projects, and many will never connect, but the scale explains the intervention. On Tuesday the Energy Information Administration cut its forecast for Texas demand growth in 2027 from 14 per cent to 6, citing the pause. A June University of Texas/Texas Politics Project poll found 56 per cent of Texans opposed to a data centre in their community, and 62 per cent in rural areas.
The counter-story got an airing from David Sacks, the White House AI adviser, complaining that nobody tells it. Ellendale, North Dakota, population around 1,100, was the subject of a Wall Street Journal feature last autumn as an $11 billion AI campus rose beside it. Sales-tax receipts that ran at about $400,000 a year came to $3.5 million in the first seven months of this year, winter power bills are expected to fall by around $250 a household, and the mayor is spending the proceeds on street repaving and a public-safety complex. Fifty-six per cent of Texans and one town in North Dakota are describing the same industry; one difference is whether the money demonstrably stays.
Britain’s queue ticket met its first serious costing, and the industry did the sums out loud. Ofgem’s proposed commitment fee, noted here a fortnight ago, spent last week being priced by the people who would have to post it. Slaughter and May calculated on Monday that a 500-megawatt project would have to lodge between £119 million and £356 million of security before reaching a final investment decision, and concluded that Britain would have the highest such charge anywhere in the world; Addleshaw Goddard ran the same sum for 1,500 megawatts on Wednesday and got a range topping £1 billion. Burges Salmon supplied the comparison that stings: roughly €40,000 a megawatt in Spain, $50,000 in Texas, $70,000 in Georgia, against a British range starting at £237,500. techUK, which represents the industry the policy is aimed at, called the fee “extremely high” and a risk to Britain’s attractiveness as a destination for data centre investment; DCByte’s Kristina Lesnjak expects a two-tier market, in which well-capitalised schemes are fast-tracked and the rest wait.
Two objections deserve more attention than they will get. The first is that the fee is struck off a standardised capital cost per megawatt rather than the project’s own, so a design that delivers the same compute for less capital posts exactly the same security: efficiency earns no credit whatever in the mechanism. The second is that Whitehall is pulling the other way, having spent the spring proposing priority grid access and bill discounts for AI Growth Zones while its regulator proposes the world’s steepest charge on the same assets. The consultation meant to reconcile the two closes on Wednesday night, and the fee itself is open until 16 September.
America’s largest grid operator asked for the right to say no. PJM, which runs the system for more than 67 million people across thirteen states, proposed on Thursday a register of very large loads and an emergency framework under which data centres could be required to reduce grid demand or switch to backup generation before households are curtailed. That is distinct from PJM’s January framework, which contemplated large customers bringing their own contracted capacity or accepting curtailment. None of this displaces the grid, and it is not meant to. Transmission remains the anchor; it is what lets a megawatt built in one place serve a load in another, and how a system diversifies risk at scale. But British connection offers run to five or ten years and turbine lead times to three, and behind-the-meter generation fills the gap between the two. CoreWeave’s results on Monday put the distance plainly: 3.7 gigawatts contracted against 1.5 energised.
The isolation package, promised by the Treasury for this week. The reported components are secondary sanctions on Chinese buyers, who take more than nine-tenths of Iranian exports, further designations of Gulf exchange houses, and asset seizures. Bloomberg Economics’ Chris Kennedy doubts anything short of prioritising Iran over China changes Tehran’s calculus. Note that General Licence X, the American authorisation for Iranian oil sales, was revoked on 7 July, so the 21 August expiry still in a good many diaries no longer applies.
Five answers due tomorrow. All six American grid operators owe federal regulators their justification, or their reform, of how they connect large loads. PJM has now filed in public.
Europe’s water. Romania’s Cernavoda, which came close to shutdown a fortnight ago, is now fully offline; around fifteen per cent of French nuclear capacity is affected by heat-related restrictions, and the Rhine is at its lowest on record. Against which, Ember reported on Thursday that solar supplied 25 per cent of EU electricity in June and again in July, the first months on record at that share, and ran 17 per cent above baseline in France and Hungary during the heatwaves. The resource that scaled with the stress was the one that needs no river.
Britain’s October cap arrives by the 26th, from a three-month wholesale window now all but shut. Cornwall Insight’s last published forecast, £1,699.58, was struck in July, which is to say before this week.
British inflation lands on Wednesday morning; the more consequential document closes the same night. UK consumer and producer prices for July come at seven o’clock Wednesday, and the minutes of the Federal Reserve’s July meeting that evening, at which three members dissented in favour of a rise. At 11.45 that night the energy department’s consultation on strategic policy guidance to Ofgem for network growth closes: the document meant to reconcile a regulator pricing scarcity in the queue with a government promising growth through it, and it will attract a fraction of the attention.
Thursday brings the Philadelphia Fed survey, Walmart, and the Texas commission’s meeting on ERCOT’s request to suspend its study deadlines. Friday is a British morning: retail sales, public sector finances, consumer confidence and the flash purchasing managers’ index, read against a Budget on 28 October that independent forecasters think needs tens of billions it does not yet have. Ofgem’s cap and Nvidia’s results fall on the 26th; Jackson Hole runs from the 27th.
Strip out the geography and this week saw one argument recurring in multiple places at one. A toll on a strait, a fee on a queue, an audit form in Austin and a rally line about petrol are all attempts to settle who bears the cost of energy that has become scarce, and not one makes an additional unit of it. They decide whose bill it lands on. They do not change the bill.
What is striking is how little of it an importing country controls. The price of a transit is set by underwriters responding to Tehran, the price of a barrel by a refinery constraint in another hemisphere, and the gap between a German megawatt-hour and a French one by a decision about generating capacity taken thirty years ago. Britain now has industrial electricity prices more than ninety per cent above the median of IEA member countries, manufacturers paying around 27p a kilowatt-hour against roughly 16p elsewhere, one in ten facing insolvency within the year and a quarter having moved production abroad or actively considering it. That is not a market outcome anyone chose. It is the compound interest on decades of importing energy and calling it a strategy.
Which is where the leverage actually is. Every unit of electricity demand avoided can save roughly 2–2.6 units of gas energy that would otherwise have to be bought, shipped, insured and burned, depending on the generating technology. It is the only saving whose price cannot be reset by a strait, a queue or a foreign ministry, and it carries no war-risk premium because it never goes to sea. Efficiency can be delivered while the wires are being built rather than instead of them, the grid remaining the anchor with generation close to load filling the gap the queue leaves. The striking thing about the Texan directive is that it asks for exactly this in writing, requiring every applicant to declare its on-site generation and what it will do to reduce demand on the grid. An audit form in Austin has reached the EDGE conclusion from the other direction, by way of the bill.
A toll can be levied, a fee can be charged, an audit can be demanded and a price can be defended from a stage. Not one of those things has ever produced a kilowatt-hour. The cheapest, most secure and cleanest unit on any bill remains the one never consumed, generated close to where it is used, and it is the only one on which nobody abroad can levy a toll.
Weekend Edition, 9 August - who pays for the AI power boom got its first official answers, in Texas, Virginia and Britain.
Weekend Edition, 2 August - two premiums, war and AI, moving in opposite directions; importers pay both.
A Very British Problem - what happens when British infrastructure meets a heatwave, and the case for an efficiency-first rebuild.
The Green Stop - why climate capital needs better architecture, grounded in physics and commercial logic.
The full archive is at jonathanmaxwell.substack.com.
The EDGE Briefing is researched with the help of AI, run through a sequence of queries I have designed and refined over time, and checked against my own body of work on energy, efficiency and infrastructure, where I select, verify, edit and take responsibility for every judgement. It is for information only and is not investment advice.
Iran, the strait and the oil market
Reuters - Iran defiant on strait as Trump tells Americans to accept high gasoline prices (14 August)
Mediaite - Trump’s remarks on gas prices and the Iran war, Garden City rally (14 August)
Forbes - Iran tells Trump he cannot make the Strait of Hormuz US territory (15 August)
Al Jazeera - UAE accuses Iran of attacks on two ADNOC vessels (14 August)
Washington Times - Bessent on unprecedented economic isolation (14 August)
Fortune - Iran’s proposed Hormuz transit fee, with Rapidan and Eurasia Group commentary (12 August)
Marsh - Middle East war-risk insurance market update (22 July)
IEA - Oil Market Report, August 2026 (12 August)
Oil & Gas 360 - BofA’s Francisco Blanch on transits and diesel cracks (10 August)
OFAC - revocation and wind-down of the Iran oil authorisation (7 July)
Prices and the consumer
AAA - national average fuel prices
EIA - Short-Term Energy Outlook, 11 August
Forbes - petrol and diesel on track for the most expensive August on record (14 August)
CNN/SSRS - national polling on petrol-price approval and whether the Iran war has been worth the cost
BLS - Consumer Price Index, July 2026 (12 August)
Penn Wharton Budget Model - the federal fuel tax holiday and its pass-through
OilPrice - UK industrial electricity prices and manufacturing relocation
Texas
Office of the Texas Governor - comprehensive data-centre audit directive (3 August)
Texas Tribune - inside the data-centre approval pause (14 August)
University of Texas/Texas Politics Project - June 2026 statewide poll on data centres and local opposition
The Wall Street Journal - feature on Ellendale, North Dakota and its AI campus (September 2025); discussed by David Sacks on the All-In podcast, episode 285 (14 August)
InForum - regulatory filings show the Ellendale data centre benefited power customers by over $38.4m
Britain and the connections queue
Ofgem - proposed data centre connection reforms (consultation, closes 16 September)
Slaughter and May - “Pay to Stay”: Ofgem’s plan to cull the data centre connection queue (10 August)
Addleshaw Goddard - Ofgem’s CURATE consultation and grid-connected data centres (12 August)
Burges Salmon - the data centre commitment fee, with international comparators (3 August)
Data Center Knowledge - Ofgem’s fee aims to clear the grid queue, but who benefits? (10 August)
techUK - response to Ofgem’s demand connections consultation, 30 July 2026
DESNZ - draft strategic policy guidance for electricity networks growth (closes 19 August)
Ofgem - price cap for 1 July to 30 September 2026, and the October publication date
AI, power and Europe
PJM - August large-load registry and emergency framework (13 August); January 2026 bring-your-own-power framework
FERC - show cause orders on large-load integration, responses due 17 August
Ember - solar helps Europe’s grid withstand extreme heat (13 August)
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