Patrick Boyle put out a piece a couple days ago basically saying the same.
However it’s worth noting that pretty much all his clips are negative, warning of issues lurking in the financial world (usually outside of the media’s purview).
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Paul Krugman :
So far, despite much higher oil prices, demand for oil has fallen by only a fraction of the loss of supply. Instead, the world economy is running by taking oil out of storage. Since there’s only so much oil in the tanks, this can’t go on. So if the Strait doesn’t reopen, prices will have to soar high enough — and inflict sufficient economic damage — to destroy another 11 or more million barrels a day of demand. That’s a lot.
Thinking about this very precise question after all the news of drones and missiles hitting oil infrastructure.
If the Strait of Hormuz was magically reopened tomorrow, how quickly could Gulf oil production come back online? Pretty quickly, according to Goldman Sachs. But the longer it stays shut the more severe the problems.
The short answer is that oil production and shipping can be recovered rather quickly because the damage to infrastructure has been limited.
In contrast LNG infrastructure is fu…significantly damaged. No quick recovery can be expected. Whatever happens in the Strait of Hormuz, it’s probable that next winter will be an interesting one.
JPMorgan earlier this month warned that Qatar’s massive Ras Laffan complex “may require years of repair” to bring back the estimated 17 per cent loss to output from strikes. Losing less than a fifth of LNG production might not sound disastrous, but Ras Laffan is the biggest LNG export facility in the world, and in a tight energy market this will be painful.
The long answer and the link to Goldman Sachs report at FT Alphaville (free but login).
It’s assumed that Iran has maybe three weeks storage capacity left before shut-ins would have to start, with fuel shortages etc also coming - thought it might be a few more months before actual financial consequences would show.
Clearly, it’s not a situation Iran was accounting much for.
Once the regime can’t pay its militias anymore, all bets are off.
It will be awfully close to the Mid-terms in any case.
Closed production is the most worrying thing as it represents potential permanent loss in production even after the war is over. It’s not clear to me when (or if already) we hit this stage for some of the GCC countries.
Thing is you simply cant just pull the plug on a refinery.
The moment you shut it down the oil will coagulate, ruin all the filters and all the seals.
A refinery that is switched off is a dead refinery and the cheapest solution is to simply pour the refined oil into the sea or in a depression on the ground.
Wasn’t it Azerbaijan who did this some years back when oil was so cheap and they could not sell it?
The Saudis did it too, athough it was called “stabilize the dunes” but in reality they had to get rid of overproduction.
As you say, it is not good to stop a refinery and so refineries are running at reduced capacity to extend inventory they have (they can only reduce so much). This is leading to reduced output and higher costs.
I guess some might try to time their usual maintenance to take offline when they run out of crude.
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