Oil Prices Defy Expectations Amid Iran Blockade

The ongoing conflict between Iran and various countries has led to concerns about oil prices spiking. However, despite the Strait of Hormuz being blockaded, which handles 20% of global oil traffic, oil prices have not risen as expected.

According to Andrew Zatlin from Moneyball Economics, this is because there are other ways for oil to flow beyond ships passing through the strait. Pipelines in Saudi Arabia, UAE, and Kuwait can move oil over land, effectively reducing the shortfall to around 5 million barrels per day.

Furthermore, strategic reserves in the US and China have been released into the market to offset this shortage. The private sector is also continuing to pump oil due to profitable prices of around $85 per barrel.

The demand for oil has also become more elastic, with people opting to stay home rather than commute to work, resulting in reduced consumption. This trend was exemplified by China, which reduced its oil imports by 40% in June, revealing a 'dirty secret' - that much of the reported global oil demand is actually China's stockpiling.