Running out of Oil and Hidden Shortages

インデックス作成: 2026-05-16

[00:00:00]The global economy has a shortage of oil and it's currently surviving by consuming its buffers of oil. We've been quietly burning through emergency oil reserves at the fastest pace in a decade. And if the straight off moves stays closed through summer, we will move from an oil shock to an actual fuel shortage at least in refined products like jet fuel and diesel. The straight of hormuz affects up to 20% of global oil trade and nothing hardly is getting through. IE chief fat bir says we are facing the biggest energy security threat in history and last week saw a record-breaking level of releases from global strategic reserves. The US is set to reach a 43-year low for its SPR by July. A large part of US stock releases is actually going to Asia, which has seen a big shortfall from the Gulf shutdown. But the United States has its own shortages to worry about. In particular, it's dwindling stocks of petrol and diesel. Gas prices in the US have already risen above $4 a gallon.

[00:01:14]But if a crisis continues, exports warm up prices could rise to the even more politically sensitive $5 level. But this crisis is no longer about just expensive oil. It's becoming a crisis of physical shortages.

[00:01:31]Now if we look at oil prices, oil futures might be predicting that prices will come down. Investors have retained optimism about a breakthrough for quite a few weeks now. But a key point about futures markets is that they are not a a predictor of geopolitical events. The future markets nearly always predicts that when oil prices go up, prices will fall in the future. But you can see here how oil futures predictions are often not materializing. It's also interesting to see how rapid the rise in oil prices is today.

[00:02:05]JP Morgan report that global oil inventories are falling at a record pace. They model that by June 2026, inventories reach operational stress levels. And if Hormuse remains closed until September, inventories will reach the operational floor level, the minimum required to keep pipelines functioning and refineries operating. And it's interesting to see just how much the US has reduced its strategic reserve in recent years. There was a big draw down in 2023 when prices were high, but there was no effort to rebuild reserves when prices were low in the run-up to the crisis. It means that the United States SPR is not as prepared as it could be.

[00:02:52]Now, given that Hormuz has led to the loss of 14 million barrels per day and major producers like Iraq are running out of storage, that means potentially they're having to cap wells, which could lead to damaged future supply. With all this happening, a good question to ask is, well, why haven't oil prices risen more? After all, prices are still lower than the peaks of 2022 after Russia invaded Ukraine. And theoretically then of course less oil was actually removed from global supply. But in 2022 prices were higher to start with. And if we look at the percentage change we can see that in 2026 there's been a considerably bigger jump in prices. In 2026 we are looking at a near 80% rise in price. But the shortage has also led to unprecedented attempts to increase supply. Nonopc countries like Canada and the US have really ramped up exports.

[00:03:51]But this boost in supply is of course mostly from inventories.

[00:03:56]Oil that has been stored. Now of course a high oil price does create an incentive to drill for more oil. But it is a timeconsuming process and nobody wants to start expensive drilling when there with so much uncertainty about how long the price rises may last. Now another factor is the increase in oil exports from the Saudi pipeline which bypasses Hmuz. The UAE have also announced that they will accelerate work on its new oil pipeline to bypass Hormuz which it hopes will be operational by 2027 and that will double the UAE uh capacity to 3.3 million barrels per day through pipelines. So, one long-term consequence of this oil crisis is that uh the Gulf States will never trust Iran and hummus again. Iran is playing its card because it is currently a global choke point. But by using it, it creates an incentive long-term to get around it.

[00:04:56]The crisis of course will also accelerate the shift away from fossil fuels. China may benefit from exporting solar panels and electric cars in the future, but 2027 is still a long way off, and those new pipelines will not be built quickly enough to solve the immediate crisis. In the shorter term, there's a greater risk of running not so much out of crude oil, but of its products. In particular, Europe has limited supplies of jet fuel.

[00:05:27]Goldman Sachs warned that stocks will dwindle by July. Will I regret buying a flight in August? Quite possibly. Now, European airlines of course have sought to downplay the risk, though that might be just an understandable effort to keep people buying tickets with a fear of a great station, which could be very damaging for airlines. European airports are less optimistic, warning the EU will face systemic jet fuel shortages if the straight does not open soon. And the reality is that jet fuel prices in Europe have doubled to over $187 per barrel and airlines have already started slashing short hall flights on low value routes.

[00:06:10]Now, of course, the shortage of oil would in fact be even greater if it were not for the reduction in demand we're also seeing. We have seen a particular fall in demand for oilbased products like fertilizers and plastic which are more sensitive to price. And whilst Europe and the United States worry about oil shortages affecting their summer vacations, the oil shortage is a matter of survival for African farmers struggling to afford the soaring cost of fertilizer and transportation. And this is the double whammy effect of the oil crisis. It's not just rising fuel costs, but also a jump in food inflation. The United States is already seeing an unexpectedly large jump in inflation despite theoretically being the net exporter of energy and it's a pattern that will play out across the global economy. And just like 2022, it will be the worst kind of inflation. Inflation driven by higher costs which reduce real wages and negatively affect economic growth.

[00:07:20]But if shortages do become much more acute this summer, how high will prices have to rise to actually reduce demand and deal with the shortage? Morgan Stanley have produced this graph which gives an insight into the prices needed to reduce demand. It's only really when oil prices rise above $140 a barrel that the price is high enough to significantly reduce demand. Most consumers with petrol cars, demand is pretty inelastic. You keep buying if you need to get to work. Even more so with transport firms using diesel to ship goods to supermarkets. Now, bear in mind that this past year saw prices around $70, leading to a decline in investment in new oil capacity. It was an area of what we've called supply destruction.

[00:08:11]Now, one thing keeping oil prices lower than they would otherwise be is traders perpetual optimism. But a diplomatic breakthrough is just around the corner.

[00:08:22]Another factor is a surge in exports from nonopc countries. Also, Asian economies and China in particular have responded to the crisis by significantly reducing imports. What's happening there is that both China and Japan have significant oil stocks. They've been preparing for an event like this for quite a long time. China is reported to have a 180day reserves, Japan even longer. But strategically, they would be reluctant to keep drawing down reserves.

[00:08:54]And recent buying suggests Asian buyers alone took 7 million barrels for August delivery.

[00:09:01]So, it's in the summer that the crunch could intensify the crisis. Summer is a peak period for demand and the SPR will start to hit operational limits which creates a bidding war for remaining stocks of essential fuels like petrol, diesel and jet fuel. And the oil crisis will have effects on every economy. In particular, we're already seeing a jump in bond yields due to fears of both higher inflation and rising government borrowing. This video explains the costs of rising bond yields and why they're going up.