How high could oil prices go? The Strait of Hormuz — through which a fifth of global oil and liquefied natural gas usually transits — is still shut, and the financial world is trying to work out what it means for energy prices. But such estimates are heavily dependent on how long the strait might remain closed and how spooked investors are going to get, which turns the whole thing into an elaborate game of “pin the tail on the donkey”.
That involves, of course, sizing up the donkey. Imagine the worst case, where the strait remains closed for an extended period. That would lop off 20mn barrels a day of crude and refined products from global supply. Even then, some could be rerouted via pipelines in the region. The world was already expected to produce more barrels than it would consume this year, and another few could be squeezed out of other producers — including US shale oil and new hotspots such as Guyana. A net loss of 12mn b/d would be more than oil demand fell during the pandemic.