Structural Shock, Not a Spike: Why Oil Could Stay Above $70 for Years

• Saudi Arabia is currently shipping only 60% of its pre-crisis oil volumes with six bypass pipelines still years from completion.
• The US Strategic Petroleum Reserve sits near its lowest point in several decades with China and Europe facing similarly thin stockpiles.
• Lower expects oil to trade in a $70-90 range over the next two to three years as Middle East supply risk persists.
• Only three manufacturers worldwide currently produce the gas turbines data centres need, creating a roughly five-year capacity backlog.
• China's EV sales are now outpacing internal combustion vehicle sales, a shift Lower expects high oil prices to accelerate further.

The oil market has spent the last year absorbing geopolitical shocks that show no sign of resolving quickly. From Iran's standoff over the Strait of Hormuz to the slow bleed of the world's strategic reserves, the dynamics reshaping crude pricing look structural rather than temporary. Scott Lower, President & Chief Executive Officer of Dune Oil Corp. (CSE:DUNE) discussed a wide-ranging conversation covering Middle East supply risk, the world's depleting reserves, the AI sector's growing energy appetite, and where investors should be positioning across the oil space.

A Region Reshaping Global Supply

Lower frames the current environment as a multi-year disruption rather than a short-term spike. He says Saudi Arabia is currently shipping only 60% of its pre-crisis oil volumes, even as tankers increasingly find ways through. Six pipelines are now under construction in the region specifically to bypass the Strait of Hormuz, but those projects are years from completion.

Iran's own production outlook remains tied to US sanctions policy, and Lower doesn't expect that to ease while the current regime remains in power. Combined with the years required to rebuild shipping infrastructure, he sees a sustained repricing of Middle East supply risk rather than a temporary premium.

"It's going to take years to recover from this because there's going to be risk in this area and risk means higher prices."

Reserves Squeeze: Why Stockpiles Are Running Dry

A second structural factor, in Lower's view, is the depleted state of the world's emergency oil stockpiles. He points to the US Strategic Petroleum Reserve sitting near its lowest point in several decades, with China and Europe facing similarly thin reserves. Refilling those stockpiles, he argues, will itself become a persistent source of demand.

Layered on top of that is the decline of US shale output, which Lower says is now falling as reservoirs deplete - part of why the US has looked to Venezuela and Iran for alternative supply. He's sceptical that Venezuelan heavy sour crude offers a quick fix, however: converting the country's roughly 66 billion barrels of heavy oil into usable light-equivalent product would take a decade of refining build-out, since the crude has to be diluted with lighter fluids simply to be transported.

Where Investors Should Be Looking: Juniors Over Majors

Asked how investors should position given the risk, Lower argues the cycle has already moved past the producers. With major oil companies now fully priced or overpriced, he sees the opportunity shifting toward junior companies with a credible path to near-term production whicha dynamic he's positioning Dune Oil's own pre-production Turkish asset around.

"The junior companies who have potential to bring on production are certainly where investors should be looking for their best bang for the buck." 

He also flagged M&A potential - juniors capable of acquiring existing producing fields and applying US and Canadian completion technology to lift output - as a theme worth watching alongside pure exploration plays.

The AI Power Bottleneck Driving Gas Demand

Lower is unambiguous that AI infrastructure build-out is real and transformative, comparing its trajectory to the internet's impact on daily life. But he argues the bottleneck isn't chips or capital, it's power. Only three manufacturers worldwide currently produce the gas turbines needed to run data centre electricity supply, creating what he describes as a five-year wait list.

The scarcity Lower says mirrors the shortage now constraining new gas-fired power capacity for data centres. Solar and wind in his view can't fill the gap because data centres require a continuous, stable power source rather than weather-dependent generation, and battery storage at that scale remains uneconomic. The result, he argues, is that many announced data centre projects simply won't come online on schedule - and that gas demand, not oil demand, is the more direct AI-linked energy trade.

Currency Debasement and the Case for Hard Assets

Turning to the macro backdrop, Lower points to recent stalled treasury issuances in both the US and Japan, and 30-year bond yields now running two to three times their Covid-era levels, as signs that investors are losing confidence in currency stability. His conclusion is straightforward: avoid instruments tied to government money-printing and rotate into assets that hold value through inflation.

Fundamental assets such as energy, minerals, hard assets is how Lower describes where he'd rather see capital allocated, alongside equities more broadly, over bonds or money-market funds. He includes gold, silver and copper in that basket alongside oil, arguing all four are outperforming as safe havens in the current environment.

Tariffs, Self-Sufficiency and the Long Road Back to Normal

On trade policy, Lower notes that energy has so far been kept exempt from the tariff regime entirely, given the political sensitivity of gasoline and diesel prices, a contrast with the protectionist tariffs now applied to steel and Canadian aluminium. He's blunter about Europe's position: energy policy decisions, including nuclear shutdowns in Germany and development moratoriums in the North Sea, have left the continent's manufacturing base - steel in particular - structurally uncompetitive, a dynamic he expects to persist without a change in approach.

On the shifting flow of Russian crude to China and India, Lower expects routes rather than volumes to keep changing, with shipments increasingly moving through the Arctic to bypass the Strait of Hormuz while pipeline capacity is built out on a process he expects to take a couple of years to normalise. He also expects high oil prices to accelerate the shift to EVs, pointing to China's EV sales now outpacing internal combustion vehicles.

TL;DR

Scott Lower, President & CEO of Dune Oil Corp., argues the current oil market reflects structural, multi-year disruption rather than a temporary spike. Saudi shipping remains 40% below pre-crisis levels, global strategic reserves are depleted, and Iran's standoff over the Strait of Hormuz shows no near-term resolution, pointing to $70-90 oil for the next two to three years. Lower sees junior producers as better positioned than already-repriced majors, while AI-driven data centre demand is constrained more by gas turbine scarcity than oil supply. Against currency debasement risk, he frames oil alongside gold, silver and copper as part of a broader hard-assets investment case.

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