Kate Mackenzie

I wonder how many times we'll see this cycle repeated in the next few days

67% OF AMERICANS THINK GASOLINE PRICES WILL RISE OVER THE NEXT YEAR FOLLOWING U.S. ATTACK ON IRAN, ACCORDING TO REUTERS/IPSOS POLL

wow, i love this website www.youraislopbores.me

11/ historically there was *some* unused capacity that could come online in a squeeze. Mostly this has been Saudi Arabia, but for a while in 2010 - early 2020s US shale, which is easy-ish to ramp up, also featured. But US shale is at or close to its limits, and unlikely to grow more according to EIA

True - there was also US shale of course but not clear they have much spare at all

Thanks & yes - and I that may be an underestimate China’s SPR - no one really knows. Except perhaps @alexbhturnbull.bsky.social

Hang on, I knew China’s SPR was big, but 3x the current US levels?? Great thread

I was in Tehran this time last year. I want you to see how beautiful my city is. I want you to see the city the US/Israel is trying to wipe off the face of the earth

US is also bombing Ecuador.

someone at the pentagon frantically typing “Claude, open the strait of Hormuz for me, quickest possible strategy, make no mistakes.”

I am once again reposting this absurdly useful essay from Tim and Kate, because not enough of you have read it.

Ikr ♥️

10/ fwiw, there wasn’t much of a “spot” oil market in 1979, much of it was priced under long term contracts… seems to now be a view that this meant prices were bid up above the fundamentals of 4% net supply exit. but I doubt any market apparatus can help with *this* scale of supply disruption.

But I mean, who knows. Things that so recently seemed unthinkable just keep happening.

but this sort of policy design is no doubt very very hard, especially on the fly! I suspect it makes cost optimised refilling of the SPR look like a piece of cake by comparison, and there was a playbook for *that* per @skandaamarnath.bsky.social and @arnabdatta.bsky.social

Yeah 100% wouldn’t surprise me. Price controls on domestic oil under Nixon which we all heard about a bit back in 2022; iirc they are not considered to have worked super well; which doesn’t mean they couldn’t..

Compare & contrast

2008-09 USO vibes for sure

"I think the current crisis absolutely vindicates China's push to electrify everything, notably road transport... wouldn't be surprised we see China push to be even bigger & bolder to transition to clean energy & electrify everything" Erica Downes from Colombia CGEP on BBG TV just now.

9/ oil supply & demand are highly asymmetric.
Supply *can* drop suddenly (war etc) but *can’t* be increased quickly.
Demand, however, can’t* change very fast in either direction. *Except for during Covid and of course oil prices briefly went negative; but that was exaggerated by market structure.

8/ markets freak out about oil *supply* because supply can only be added slowly. Oil infrastructure is expensive and risky, people don’t just build that stuff on a vague whim. World consumes c. 100m barrels per day. There is not spare capacity to cover 1/5th of that amount, anywhere.

How Full Is the USA Strategic Petroleum Reserve? Just how full is the U.S. Strategic Petroleum Reserve?

7/ some countries maintain “strategic petroleum reserves” (SPRs). The US one is closely watched & was extensively used after Russia invaded Ukraine in 2022 to manage down gas pump prices. However, it hasn’t been fully replenished, is at 60% capacity or 1/3 what China is estimated to have in its SPR

Emergency Prices | Kate Mackenzie An interview with Isabella Weber on inflation and the energy sector.

6/ reminder that even while fighting to maintain a safe climate & wanting to quit fossil fuels ASAP, any energy system/price shock is bad, and worse the poorer or more vulnerable you are. Recessions hurt, and energy underpins economic activity.
See @isabellamweber.bsky.social i/v

5/ important note: in a high oil price scenario, countries that produce lots of oil are NOT necessarily protected from effects of high oil prices. If your country’s oil industry is a commercial one that is allowed to export & not under heavy state control, yr citizens pay the global price tra la

White man wearing suit with fire towering behind him and translucent skull overlay with the words “Widespread death and suffering” in all caps

4/ gonna point out here that kinetically stopping a fifth of global oil supply is unprecedented and kinda *unimaginable* which is probably why markets were slow to react last week and why @sky.skymarchini.net ‘s oil pals sent these such responses to questions about the outlook:

HORMUZ TRACKER: Iran-Linked Ships Are the Only Ones to Transit Strait of Hormuz transit remains near a standstill for a seventh day, with Iran-linked ships the only commercial vessels making the crossing in the past 24 hours.

Bloomberg’s built a ship tracker and absolutely nothing is moving in the Persian Gulf rn — www.bloomberg.com/news/article...

3/ explanations for the record $147 WTI price in 2008 include:
Peak oil supply (geological)
Tight supply (investment/storage)
Financial speculation*
Either way, it was a lot of vibes and didn’t reflect supply/demand fundamentals.

*this is complex and requires a whole thread!

Chart showing USD prices crude from 1978 - 2009 with dramatic spike in 2008

2/ Oil markets are “big, deep and liquid” which should mean they quickly find the “right” price that reflects the real supply/demand balance. But like all commodities, they’re also a little bit … mysterious. Eg the reason for the massive spike in 2008 is somewhat contested

Threading some stuff about oil & oil markets, just basic but hope it helps:
1/ oil markets are what you call “finely balanced”. Supply is usually very very close to demand/consumption. Demand is hard to shift *quickly* in response to supply hiccups.
So even small supply changes = big price effects

Here's a new look at SSTs, now including the official boundaries for "Gobsmacking Bananas," "Uncharted Territory" and "Totally F&%ked".

Look at 1998/99, 2016/17 and 2024/25. This is what to expect in 2027/28 if a monster El Nino comes to pass later this year.