Three weeks into the Iran war, there\u2019s an ever-growing gap between the price of oil futures and supplies that determine costs for consumers in the real world.<\/p>\n
The global Brent benchmark has jumped more than 50% to around $112 a barrel as the near-complete closure of the Strait of Hormuz and attacks on Middle East energy facilities choke supplies. But the cost of almost every physical barrel is surging even more, as tight supplies boost prices of products that consumers actually use, like gasoline, diesel and jet fuel. <\/p>\n
Refiners in Asia, the top consuming region, are buying cargoes from thousands of miles away at eye-watering premiums to Brent as they try to secure whatever supplies are available. Trucking companies are starting to feel the impact of higher fuel costs, and some parts of the world are crimping purchases of fuels that power ships. With jet fuel prices above $200 a barrel, major European airlines say passengers will have to bear the extra costs.<\/p>\n
The disconnect between futures \u2014 which are underpinned by hundreds of billions of dollars of daily transactions \u2014 and physical oil is partly due to aggressive U.S. attempts to keep a lid on prices, including through releasing emergency supplies. The reality is that the global economy is suffering from a bigger inflationary hit than futures suggest, putting pressure on central bankers and the Trump administration before the November midterm elections.<\/p>\n
\u201cYou look at the paper markets, they\u2019ve entirely disconnected from the physical markets,\u201d said Jeff Currie, chief strategy officer of energy pathways at Carlyle Group Inc. \u201cWe\u2019re dealing with an enormous supply shock.\u201d<\/p>\n
The price shock could get much worse. Wall Street giants Goldman Sachs Group Inc. and Citigroup Inc. last week said that if the war continues, futures could hit record highs in the coming weeks, surpassing $147.50 set in 2008. It\u2019s unusual for physical and futures prices to remain far apart for long periods.<\/p>\n
Those calls are being driven by what the International Energy Agency described as the biggest-ever oil supply disruption. Goldman has estimated that about 17 million barrels of oil flows daily through the Persian Gulf. <\/p>\n
Brent neared $120 twice in the last two weeks, a level not seen since 2022 \u2014 after Russia invaded Ukraine \u2014 putting pressure on Washington to calm the market. <\/p>\n
On Thursday, Treasury Secretary Scott Bessent told Fox Business that just days after announcing one massive stockpile release, the U.S. could consider another one, despite question marks over the viability of doing so logistically.<\/p>\n
He then followed with comments that stunned already exhausted oil traders: The U.S. might lift some sanctions on Iranian oil, despite being at war with Tehran \u2014 a move since enacted. Traders around the world, who have had to approach Iran trades with the utmost caution for years, expressed exasperation with the news.<\/p>\n
Other efforts to tame prices include the unsanctioning of Russian oil at sea, and there has been intense trader speculation that the U.S. may be intervening in futures markets, something Bessent has denied. Soaring volatility has also limited the size of positions that traders can take, as it makes it more expensive to do so. While that has helped keep a ceiling on futures, it\u2019s limited compared with the impact of the disruption in Hormuz. <\/p>\n
\u201cThe U.S. has almost exhausted the arsenal for stopping prices from rising, given this degree of uncertainty, if the strait isn\u2019t opened and the uncertainty of physical damage isn\u2019t removed,\u201d Christof Ruhl, global advisor at Crystol Energy and a former BP economist, said in a Bloomberg TV interview. \u201cSo there isn\u2019t much they can do.\u201d<\/p>\n
The signs of stress are growing, too. <\/p>\n
Container shipping lines are adding fuel surcharges, and huge price swings in shipping fuel markets are causing some marine fuel buyers to hold off on large orders because of the price fluctuations. <\/p>\n