If oil flows are normalizing, why are oil prices rising?
First, rising they are:
However, flows are not quite “normalizing,” at least in the sense that, as best we can tell, transit through the Strait of Hormuz is still contested, expensive, and maybe down 25% compared to prewar. But pipeline bypasses are adding capacity such that Middle-East global energy supplies appear to be close to prewar levels.
The problems are: freight rates are way up and, because oil markets are forward looking, the fact that tensions are escalating means higher risk premia are being added to crude prices. There are
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