World Is Losing 10 Million Barrels of Oil a Day, Morse Says

Summary

• The Strait of Hormuz disruption is causing an irreplaceable loss of 10-11 million barrels of oil per day, including crude and critical refined products like jet fuel, diesel, and petrochemical feedstocks.
• This supply shock necessitates higher prices to kill off demand, with prices expected to rise significantly through the end of the year; every month of disruption adds incremental price pressure.
• Refined product inventories, especially for diesel and jet fuel, are critically low globally, leading to product price increases of up to 60% compared to 30% for crude.
• Gasoline prices have already surged to $6/gallon in California and $5 nationally, with further hikes likely to eventually destroy demand.
• Geopolitical focus is on Washington and Tehran, but mistrust and prior conflicts complicate negotiations to resolve the crisis.
• Additional regional risks include potential escalation in Iraq and Kuwait due to Iranian influence and historical tensions.
• The disruption is far from over until the strait is safely reopened, with no quick supply replacements available.
• Demand destruction is viewed as the necessary market adjustment, driven by sustained high prices.
• The situation highlights the fragility of global energy supply chains, particularly for petroleum products essential to transportation and industry.