What I don’t get is why prices aren’t already rising more than they have. It seems like literally everyone except the Trump administration itself expects the strait of Hormuz to remain blocked for a long time, so shouldn’t that be priced in already?
Normally you would see the massive shortfall where ~15% of global oil demand needs to be destroyed by price increases, and you would then assign the risk that happens, and take the integral over your risk distribution times your pricing scenarios.
However, two things are going wrong:
markets wildly overestimate Trump’s words and ability to resolve this, so are mis estimated risk
oil execs are happy with the extra income
So they’ve put off the price increases entirely because of hubris.
What I don’t get is why prices aren’t already rising more than they have. It seems like literally everyone except the Trump administration itself expects the strait of Hormuz to remain blocked for a long time, so shouldn’t that be priced in already?
Normally you would see the massive shortfall where ~15% of global oil demand needs to be destroyed by price increases, and you would then assign the risk that happens, and take the integral over your risk distribution times your pricing scenarios.
However, two things are going wrong:
So they’ve put off the price increases entirely because of hubris.