Oil Price Crisis Will Take Years to Recover
The current oil price crisis is far from over, and it may take years for global supply to recover.
Despite ongoing disruptions in the Strait of Hormuz, oil prices remain underpriced relative to available supply. The paper market, driven by futures contracts and short selling, has artificially suppressed prices, creating a disconnect between traded price and actual scarcity.
This gap will eventually close, leading to higher prices when reality catches up with the market. In fact, experts predict that prices could jump by 50% or more in the near future.
The US Strategic Petroleum Reserve (SPR) is at its lowest level since 1983, with storage caverns at risk of degradation due to overuse. The SPR's buffer has already been exhausted, leaving it unable to cushion the worst shocks.