Source: Paul Krugman
by Paul Krugman
“In normal times, about 20 percent of the world’s oil production passes through the Strait of Hormuz. That flow has been cut off except for Iranian oil and a handful of other vessels the Iranians are allowing through. This disruption has led to a large spike in oil futures prices …. But this price rise has been speculative, driven by the (justified) expectation of future shortages rather than a current lack of oil. In fact, so far deliveries to markets around the world haven’t declined, because shipping oil from the Persian Gulf to major markets takes 4-6 weeks. As a result there was a large quantity of oil already at sea, outside the Strait, when the war began. However, this grace period is about to end. The oil crisis is about to get physical.” (03/31/26)
https://paulkrugman.substack.com/p/the-oil-crisis-is-about-to-get-physical