Ask industry old-timers, and they will say the oil market is not very flexible. Diesel and gasoline have to become very expensive before people slam on the brakes. And on the supply side, it takes a long time for higher oil prices to nudge production up. So it might seem strange that the conflict in Iran has yet to produce a major fuel crisis.
In theory, even a small wobble should send prices skyrocketing — to say nothing of a conflict that has closed the seaway through which a fifth of oil flows. In reality, the blow has been cushioned somewhat by surpluses built up before the war started.
Net of the trickle of ships chancing the Strait of Hormuz and the flows which have been rerouted via pipelines, the conflict erased some 14mn barrels a day from global supply of crude and products in April, the International Energy Agency suggests, from what used to be a 105mn barrel per day market. But before that, supply outpaced demand by 3.5mn, according to Wood Mackenzie, which would make the real shortfall a more manageable 10 -11 mn barrels or so.