Refining Bottleneck Sparks Oil Price Rise

The Strait of Hormuz remains blocked, and oil prices are expected to rise. However, this time it's not just about crude oil supply, but rather refining capacity, which is a bigger bottleneck in the global hydrocarbons market.

According to Bloomberg Finance data, the share of refining margins in a barrel of oil is currently the highest in history and shows no signs of changing. This phenomenon explains the so-called supply elasticity.

Refineries can't quickly ramp up output unlike extraction, which means that when oil reserves are released while fuel shortages persist, refineries get flooded with crude they cannot process and reduce purchases.