It was an interesting report by Jeff Currie of Carlyle, examining how a disruption in the Strait of Hormuz could affect global energy security, commodity markets, and capital allocation at a time when the world is still navigating an incomplete energy transition.
In my humble view, predicting how high prices will ultimately go this time is an exercise best left to fortune tellers. Our alternative investment solutions are well-positioned for this kind of environment or to ride out the storm with no stress.
Here is a section:
In our view, no policy options, including a coordinated Strategic Petroleum Reserve (SPR) release, can break crude’s ascent while Hormuz remains blocked. Hoarding will likely have absorbed what remains of any “oil glut” excess barrels. Physical shortages in Asia have already driven Singapore jet fuel to $231/bbl.
Even if the strait reopened tomorrow, it would take months to restore normal flows — damaged infrastructure, scattered fleets, repriced insurance, and renegotiated contracts do not snap back. Should the strait be mined, the outage could last two to three months. Time is of the essence.
Counting disrupted barrels and metric tonnes as well as counting missiles misses how the damage actually transmits. Much of the market commentary has emphasised that the world is less dependent on oil than in the 1970s. That is true but it is precisely the wrong way to read the data.
Oil’s share of the global economy has fallen steadily for fifty years. That decline has made it less expensive per unit of GDP but more irreplaceable in function. Oil is the rare earth of the macro system.
Here is another section:
US energy dominance can hedge supply availability but not price impacts without export bans or price controls. At $130 oil, domestic producers capture roughly $400 billion in additional revenue. Net of the $450 billion gross cost to consumers, the direct income effect is $60–90 billion, or 0.2–0.3% of GDP. The production hedge works at the cash flow level. This is what the optimists are modeling. They are looking at the wrong pressure point.
The distribution matters. The winners are concentrated corporate balance sheets in the Permian; the losers are 130 million households paying more at the pump. Consumers have more votes than producers. This is why markets underestimate the disruption, they assume America will resolve it quickly to avoid testing those politics.