Why a Supply Crunch From Iran Could Send Oil Back Below $40 a Barrel
US Crude Oil Inventories Keep Falling As Hormuz Flows Slow To Start Shipping companies remain cautious about… Gail Tverberg is a writer and speaker about energy issues.
She is especially known for her work with financial issues associated with peak oil.
Prior… There have recently been many warnings about near-term oil shortages stemming from the conflict in Iran.
Most analysts assume that shortages mean higher prices.
As I will explain, the dynamics of a self-organizing economy suggest the opposite outcome — lower prices, deepening recession, and shortages of goods and services that have little to do with price.
A cartoon scene featuring a bluebird on a cliff, looking confidently at a surprised coyote who is about to fall off the edge, with a yellow sky in the background.
Coyote and Road Runner cartoon showing Wile very surprised after he runs past the edge of the cliff.
Rather than high prices, my major concerns are recession and the disappearing availability of goods and services that we rely on.
This might be similar to the empty shelves that many stores experienced in 2020 and 2021.
There may also be new government restrictions, intended to work around the reduced oil supply in a way that will allow essential services to continue to operate normally.
Oil prices are likely to fall below $40 per barrel, as they did in 2020 with Covid restrictions.
In this post, I will try to explain why this counterintuitive outcome — shortages leading to lower prices rather than higher — is what the self-organizing economy tends to produce.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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