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I don't think so.

About 20% of the crude oil and natural gas used to come via the Strait of Hormuz. That's out now, and some oil drills will need to be shut down, and it will take 3 months to 2 years to restart them.

But about half of that could be redirected via some pipelines in Saudi Arabia and the UAE.

So, only about 10% of the oil supply is missing.

But was the entire supply in the rest of the world completely without any slack? Everything was running at capacity, with zero capacity to increase deliveries? I doubt that. Let's split the 10% supply reduction into 5% that the rest of the world can provide, incentivized by the higher prices, and 5% demand destruction, incentivized by the same higher prices.

The rule of thumb in the oil markets is that a 1% reduction in supply results in a 10% increase in price. So a 5% reduction in supply should result in a 50% increase in price. We are there, actually a bit higher. Brent was trading at about $65 until February 2026, and now it's at $120. That's more than 80% higher. All these numbers have high uncertainly bars, of course, but so far it looks to me that the market is not reacting in a patently irrational way to the events.

> But was the entire supply in the rest of the world completely without any slack? Everything was running at capacity, with zero capacity to increase deliveries?

I'm trying to find some numbers here and failing utterly (thanks AI for utterly ruining search). But my recollection from when I've seen it discussed in the past is that the vast majority of slack oil production is in the OPEC countries--essentially everybody not in OPEC produces every drop they can--and even of that, the really big source of slack is Saudi Arabia. You know, all of the places that are currently unable to ship any oil because of the closure of the Strait of Hormuz.

The 1970s oil crisis was only losing 5-7% of total production. We are most likely double that amount right now.

And now we're much less reliant on oil, and more countries produce it and have reserves. The flip side is the economy and financial system already felt creaky anyway (tariffs, inflation, job market, government shutdowns, private credit, AI, etc.), so net net things may be just as bad or worse.

> About 20% of the crude oil and natural gas used to come via the Strait of Hormuz.

20% of the world's oil production. But only half is sold on the international market, the rest is used domestically. So roughly 40% of the world's purchasable oil comes through the Strait.

Even 10% is a massive number. Most oil demand is fairly inelastic. You have to get to work no matter the price of gasoline. You might turn your furnastat down a degree, but that's about it. Groceries need to get delivered no matter the price of diesel. Farmers need to fill their tractors no matter the cost. Plastic and industrial demand is fairly inelastic. The price doesn't need to go up by much to reduce demand by 1%. But to reduce demand by 10% involves massive price increases. Only a fraction of gasoline demand is truly elastic. So that 10% reduction in supply might require halving the elastic demand for oil.

Yes but the point was that supply is very elastic since what happens to old fields is that they get priced out. When an oilfield gets older it's production cost creeps up, slowly. Since most of the oilfields that can produce at $current_price + 5$ aren't even properly shutdown yet, they can be rapidly brought online if prices rise, and there's a large supply of such fields. A very large supply of them.

Nobody's going without oil, it's just pushing up inflation. Not saying that's not a problem, but the problem isn't that people are being forced to go without.

Of course EU countries are complaining to high heaven since increased inflation will push their borrowing cost up further, and given the state of their public finances this means more sacrifices. If I lived in Paris, I'd park my car indoors for a month or two. Or 100km outside of Paris.

That's basically only true in OPEC countries, and OPEC countries are generally affected by the Hormuz closure.

Outside of OPEC marginal production is basically tar sands and fracking, which cannot be ramped up quickly.

I’m going to bookmark this and check back periodically this year to see if I am truly not able to buy milk due to plastic. Interesting prediction.

I don't think that was a specific prediction, but rather an illustration of the type of impact oil shortages could have.

I'm curious if people have more specific predictions about what products/services will be affected more than a layperson would expect.

> no more plastic for milk jugs

aiui most plastics in the US for this comes from the ethylene byproducts of natural gas/fracking.

Although it would be unironically fantastic if we could hard wean ourselves off plastics and go back to reusable glass jugs. If I could bring my growler to Kroger for milk and cream I'd be a happy camper

FWIW in Germany and Switzerland milk is mostly sold in carton packaging. I never understood why the US stuck to using plastic jugs

Because it's cheap

*For the rest of the world.

The cruel irony here is that this really won't affect the US at all. Europe and Asia will feel the brunt of it, and they seem completely uninterested in working toward a solution.

Not true at all. USA will see large scale inflation. Oil and derivatives are basically the central global commodities.

I'm not American. But couldn't this being held due to the mid terms? It already looks bad as is, but if inflation started escalating immediately with the conflict (or more than it is) wouldn't it make it for for electoral purposes?

The party in charge initiated this and inflation / bad economy aren’t usually winning electoral strategies.

Why wouldn’t that affect the US? Isn’t the price of oil global? It’s not like US oil will be sold for cheaper to the local population, if that would be the case the incentive would be to export at the higher price instead, no?

If you look at gas prices in Saudi Arabia, some of it is subsidised to be lower but clearly its much cheaper to be consuming your own energy vs purchasing it internationally for a variety of reasons. The size of the effect is a messy economics question, not a black and white thing.

Weird that this was flagged dead in 2 hours? HN is really on a propaganda narrative shaping kick with the flagged dead.

ramesh31 2 hours ago [dead] | root | parent | prev | next [–]

>"Why wouldn’t that affect the US? Isn’t the price of oil global? It’s not like US oil will be sold for cheaper to the local population, if that would be the case the incentive would be to export at the higher price instead, no?" Sure, oil is a global commodity, but "global price" doesn't mean uniform impact. The US has been a net petroleum exporter since 2020 and produces ~13M bpd domestically. WTI consistently trades at a discount to Brent, often 10%+. Gulf Coast refineries are configured for the heavy/sour crude we get from Canada and our own shale, not the Gulf-state light/sweet that's at risk here. We also produce all of our own natural gas, have some of the lowest domestic prices in the world (Permian gas has literally gone negative in the past due to oversupply), and a huge amount of our energy infrastructure is set up for it (LNG is a whole other category that is far more expensive than regular gas delivery).

Compare that to Europe, which lost its Russian pipeline supply, has minimal domestic production, and is heavily dependent on LNG and Middle East crude routed through exactly the chokepoints in question. Or Japan/South Korea, which import ~90%+ of their oil and a huge chunk transits Hormuz.

Yes, the US sees secondary inflation effects, diesel feeds into everything, jet fuel into airfares, etc. I'm not saying zero impact. But "large scale inflation" comparable to what the EU is about to eat? No. The structural insulation is real, and it's why the US can posture militarily without the same domestic economic gun to its head that Europeans are faced with.

There's a limit to what we can do. Things were kind of stable before Trump went in bombing everything and I guess we a hoping he'll calm down and things can go on. There isn't an easy military solution to opening the straits it's hard to do diplomatic stuff with Trump issuing some new threat every 24 hours or so.

price shocks don't cause inflation, printing money does.