THE PRICE OF OIL

The price oil over the past two days:

• Was at $91/barrel over the past weekend.
• Shot up to just under $116/barrel when the market opened yesterday.
• Then fell to $85/barrel at 5PM yesterday.
• Over the past 24 hours, there was  low of $78.5/barrel.
• At 3PM EDT today, the price was $84/barrel.

During the past month:

• Oil sat at around $65/barrel.
• Was as low as $61/barrel a little more than a month ago, February 12
• Was up to $67/barrel at the end of February.
• War started on February 28.
• On March 2 oil rose to $71/barrel and went up to $95/barrel on March 9.
• So you might say with that one skyrocket price yesterday, the price of oil went up $19/barrel since the war started.

From Wikipedia:

The price of oil, or the oil price, generally refers to the spot price of a barrel(159 litres) of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC Reference Basket, Tapis crude, Bonny Light, Urals oil, Isthmus, and Western Canadian Select (WCS).^[1][2] Oil prices are determined by global supply and demand, rather than any country's domestic production level.

The two prices most referenced in the Western world are West Texas Intermediate (WTI) Crude (NYMEX), which at this writing is between $84-$89/barrel, and Brent Crude (ICE) at $91-$93/barrel.  Those prices at the top refer to WTI or NYMEX, while Europeans use ICE.

A useful reference is Oilprice.com, which gives the price of various oil blends.  At this writing:

• WTI Crude  $84.74/barrel
• Brent Crude  $89.52/barrel
• OPEC Basket  $96.40/barrel

• Gasoline  $2.673/gallon
• Heating Oil  $3.375/gallon
• Ethanol  $1.863/gallon

Another reference is a chart on historic crude oil prices, inflation adjusted.  Looks busy, but I use this graphic all the time, for you can see trends after oil price shocks.

The major peaks occurred in December 1979, June 2008, April 2011, and June 2022 in inflation-adjusted terms. Another interesting item to note is that the inflation-adjusted average price (horizontal lines) has been increasing as mentioned above.  This may be the result of increased extraction costs as oil becomes harder to find, and it requires much greater technology to extract it.

Think back to when the world economy sunk.

• There was severe recession following the 1979 and 2008 oil price jumps.
• Following the 2011 and 2022 escalations, the globe saw significant inflationary pressure and market volatility.
• In 2008 there was no war, just a set of worst case economic conditions that shot the price of petroleum to near $150/barrel, triggered by the Great Recession of 2007.  However, oil plunged to $41/barrel by January of 2009.
• Scary to think what the world economy will be over the next year if this Iran War leads to petroleum prices shooting up to $150/barrel.

At this point of the Iran War, with the U.S. and Israel wiping out Iranian war assets, oil tankers are still not moving through the Strait of Hormuz.

• Traffic has dropped by 97% since the war began.
• 20-25% of world oil passes through the Strait of Hormuz.
• Plus, 33% of world fertilizer shipments come through here.  Global food security is also at risk.
• Questions remain:
• Can the U.S. safely escort ships through this bottleneck?  As of this writing, this has not yet started.
• Countries like France have offered to also provide this service, but only after the war ends.
• Why haven't these tankers taken the "cheap" insurance guarantees offered by the U.S. Development Finance Corporation?

• The problem is that shipping lanes are just two miles wide, turning opposite Iranian islands with a mountainous coast that provides cover for movable launchers.
• Bombings have curtailed Iran drone production, but what percent of the 10,000/month has been destroyed?
• Iran can still place mines that can't be seen.
• Are the Yemen Houthis totally destroyed?  Google AI says no.

The Yemen-based Houthi movement has not been totally incapacitated and remains a resilient, potent force despite experiencing significant losses.  While US and Israeli strikes have degraded their capabilities and caused them to pause attacks during ceasefires, the group maintains the ability to launch assaults and has adapted to years of conflict. 

• 
  Is there a way to bypass the strait?

• The Red Sea/Suez Canal route is insufficient and much more expensive.  Plus, Houthi militants could be a problem.
• More pipelines, but these too are vulnerable, and will take years to build and secure.
  

• 
  Thus, the combination of Iran now targeting Saudi Arabia, Kuwait, Iraq, Bahrain and UAE oil fields, and these countries cutting back production anyway because of these shipping problems, is seen as now long-term disruptions that will more and more push the price of petroleum back above $100/barrel.
• And, of course, oil companies will continue to optimize their profits by just jacking up prices for whatever good reason they can find.  Gasoline prices, according to Google AI:

• National Average: The average price for a gallon of regular gasoline in the U.S. jumped to $3.48, compared to $2.98 before the conflict.
• Regional Differences: In California, prices surpassed $5 per gallon, with some areas seeing even higher, The Guardian reported.
• Diesel Prices: Diesel prices increased by 23%, reaching $4.65 a gallon, AP News reported.
• Cause: The surge is due to the conflict affecting oil shipments through the Strait of Hormuz, Bloomberg.com reported. 

Can the Strait of Hormuz be made safe enough for oil shipment to return?  Watch this video.  Plus:

Trump Threatens 'Death, Fire, and Fury’ on Iran If It Blocks Oil Flow

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