Why the Real Oil Crisis Hasn’t Started Yet

Key Points:

• The Strait of Hormuz closure has caused a significant disruption in global oil supply, with an estimated 11-12 million barrels per day not reaching markets, roughly equivalent to the consumption of two Indias and far exceeding shortages seen during the 1970s oil shocks.
• Despite this massive supply disruption, oil prices have not yet reached historic highs due to the drawdown of strategic reserves and the release of sanctioned Russian and Iranian oil, which temporarily buffered the market.
• These buffers are now largely depleted, leading to tightening supplies, refinery shutdowns in Asia, fuel shortages in countries like Australia and Kenya, and rising gasoline prices in the U.S., particularly on the West Coast where prices have surged to $5.88 per gallon.
• Analysts warn that if the Strait remains closed, oil prices could soar to $200 per barrel or higher, and physical supply shortages may intensify, potentially causing gas stations to run dry in affected regions by late spring.
• While political efforts and strategic reserve releases have temporarily mitigated price spikes, the evolving situation suggests the global oil market is nearing a critical tipping point with diminished spare capacity and less flexibility in freight and inventories.