4 ms·
The craziest thing to me is that the conventional wisdom is that this will be over by July. We will be lucky if any ships get through the straight by December.
by outside1234 4mo ago
The craziest thing to me is that the conventional wisdom is that this will be over by July.
We will be lucky if any ships get through the straight by December.
- cassianoleal 4mo ago> the conventional wisdom is that this will be over by July Whose "conventional" wisdom?
- bryanlarsen 4mo agoCrude oil prices appear to encode an optimistic outcome.
- cassianoleal 4mo agoSo "the market" is conventional "wisdom"?
- AnimalMuppet 4mo agoIt's the "wisdom" (rough consensus) of those willing to put their money where their mouth is. So, yes.
- jjk166 4mo agoBy what objective standards does a price 41% higher than prewar encode an optimistic outcome? https://xkcd.com/904/ https://xkcd.com/904/
- bryanlarsen 4mo agoA 10% reduction in supply of a commodity with fairly inelastic demand usually results in a lot more than a 40% increase in price.
- jjk166 4mo agoI say it usually results in a lot less. Prove me wrong.
- bryanlarsen 4mo agoAn infinitesimal reduction in supply of a product with a perfectly inelastic demand curve will result in an infinite increase in price. More concretely, the oil supply tightening in response to COVID was considerably smaller than todays, yet oil prices spiked higher than we have today.
- jjk166 4mo ago> An infinitesimal reduction in supply of a product with a perfectly inelastic demand curve will result in an infinite increase in price. And an infinitesimal reduction in supply of a product with a perfectly elastic demand curve will result in zero increase in price. So the real value has to lie somewhere between 0 and infinity. That's not a particularly useful prediction. > More concretely, the oil supply tightening in response to COVID was considerably smaller than todays, yet oil prices spiked higher than we have today. That is not what happened, oil prices tanked in response to covid despite global oil production falling by about 10%. 2020 had the lowest average price of Brent Crude since 2004, and did not recover to the level immediately before the pandemic until March 2021. You may have been thinking of the elevated prices in early 2022 shortly after the Russian invasion of Ukraine which peaked in May 2022. Of course that war which has continued for years affecting a major oil exporting nation only led to an 18% increase in price, quite a bit below the 41% increase seen in the current situation.
- ZeroGravitas 4mo agoThe negative reading of that signal is massive demand destruction like a global recession. So a reduction in oil supply and a reduction in demand equals only a minor rise in prices.
- thrance 4mo agoBanks and economists base their predictions on very optimistic timelines of the strait reopening soon. The alternative is truly apocalyptic.
- _DeadFred_ 4mo agoSome ships are getting through already. https://www.wsj.com/world/middle-east/ships-are-sailing-dark-to-sneak-out-of-strait-of-hormuz-0db91dcf https://www.wsj.com/world/middle-east/ships-are-sailing-dark... Meanwhile Iran keeps trying to run the blockade they established and failing. https://bsky.app/profile/tankertrackers.com/post/3mn66mhl4kc24 https://bsky.app/profile/tankertrackers.com/post/3mn66mhl4kc...
- dgellow 4mo agoSome ships are passing thorough, it’s just extremely limited. But you’re right, it will take a very long time for the Strait to be operating at a meaningful level