Low Oil Demand Sparks Global Economic Concerns

The recent closure of the Strait of Hormuz has not led to a spike in oil prices as expected. Instead, prices have barely budged and are even adjusted for inflation appear lower than previous spikes.

This is not an isolated incident. Looking back at energy data since 1820, low demand has repeatedly produced financial crashes, wars, and collapses. The current situation may signal another such period on the horizon.

The difference between high and low energy affordability lies in how the economy behaves. High demand is characterized by increasing affordability for consumers to purchase cars and fuel, leading to rising new car sales and home construction. In contrast, low demand means fewer people can afford basic necessities, resulting in stagnant or falling oil prices.

Data analysis shows that periods of high energy growth have been associated with favorable economic outcomes, including financial stability and industrialization. Conversely, times of low energy growth have been marked by adverse events like financial crashes, wars, and government collapses.