Letter from the US: The oil market abyss

The overlooked oil supply issue is that even after the Strait of Hormuz opens, barrels won’t readily return

Traditional supply-demand logic has broken down; market signals are not working as normal; supply elasticity has snapped; and scarcity fears have been replaced by systemic paralysis. Oil prices are set to remain elevated for a long time given the difficulty in bringing back supply, first and foremost, and then adding new barrels. The era of cheap energy is over. The unmistakable message from this year’s CERAWeek in Houston saw industry leaders repeatedly emphasise that, no matter how high prices rise, new oil and refining supply will not materialise quickly. Chevron CEO Mike Wirth captured the mood bluntly. He argued that physical markets are already tighter than futures curves imply, noting