Huh – haven’t hear from the world’s most incompetent consultant …. Koptis. Didn’t he say oil would be at $300 a barrel?
The intelligence guys are working with mostly the same information as well-informed civilians, but they do this for a living, so maybe we should listen:
U.S. strikes probably won’t make Iran back down, and as long as we are set on doing something that won’t work, odds are oil won’t flow.
So, global petroleum inventories are quite low, China now included. Global exports are down more now than they were before the MOU. We’ve been waiting to see when the inventory freak-out would commence, but with Bab el-Mandeb now closed, it’s hard to say what’s doing what to prices. It seems reasonable to expect that, given depleted inventories, Russia’s troubles and now both the Red Sea and Persian Gulf closed to oil shipments, May’s high could easily be topped.
To repeat a worry from pre-MOU days, prices aren’t the only problem. Physical shortage and uncertainty of future supply create additional economic drag, on top of high prices.
With the felon-in-chief reducing U.S. security guarantees in the world, and sometimes joining with Israel to undermine security, one big question for other countries is what to do about security. Many are beefing up their own arsenals and strengthening alliances which don’t rely on the U.S.
Some countries expected, some hoped, that China would become a guarantor of security, supplanting the U.S. Makes sense; if Rome did it, Britain did it and the U.S. did it, the next big power would, too. Apparently, that’s not happening:
https://www.foreignaffairs.com/china/gulfs-china-problem
Now, just because some smart people think China doesn’t want to become a regional security guarantor, just because it looks that way now, that doesn’t mean its true for all time. That said, it is generally the case that transitions away from one international hegemon to another involve a period of war and turmoil. If we are going from a period in which there was a dominant security guarantor to a period without, that’s could be bad.
If we are going into a period of water, food and energy insecurity without a big military power telling people to settle the heck down, that could be worse. And in case you hadn’t noticed, war is already on the rise.
To be fair, many (most?) people who know the oil industry and markets well predicted prices far above $100/bbl.
From what I gather, those predictions were well-founded, and the confounding factor was that China was able to reduce its oil imports by a remarkably large amount with little damage to its economy.
Take this with a big grain of salt. The China explanation exploded across the internet, but I haven’t taken the time to identify a source that would give me high confidence about the nature and magnitude of China’s impact.
Here’s what looks like a reliable source on Chinese petroleum inventories:
https://www.ceicdata.com/en/china/crude-oil-inventory
I haven’t found time series data at CEIC, which makes it clunky to use. Over the period covered, port inventories are quite low. My guess is, the period covered is just since China began its massive inventory build.
China had a great business going where they imported oil from Iran, refined it, and then sold the refined products to other asian countries. That sanction busting business stopped abruptly. However, it didn’t change much for China; except closing down some refineries and losing the profit. It is ny understanding that they have not even had to reduce their strategic reserves yet. Those dependent on refined products from China are hurting.
There’s the “But whadda about 2008 oil prices?!” crowd who are misreading this situation. Yes, in relative terms it’s cheaper, yes, efficiency is improving, yes, wind & solar are going gangbusters, etc….but the reality of a sustained disruption has yet to sink in with various parts of the market. China bought the world some time, but reserves are not unlimited.
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