Bankless

$200 Oil by June?—The Biggest Oil Shock in History | Rory Johnston on The Hormuz Crisis

1h 37min

The Bankless episode with Rory Johnston delves into the unprecedented Hormuz Crisis, highlighting a massive supply shock with 13 million barrels of oil per day shut in and 600 million barrels lost to date. Johnston explains how the market's current underreaction, influenced by geopolitical factors and short-term trading, could drive oil prices to $200 a barrel by June if the crisis persists. The discussion also covers essential oil market fundamentals and the long-term implications for global energy transition.

Summarized by Podsumo

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✨ Key Takeaways

1

Hormuz Crisis Impact

The closure of the Strait of Hormuz has led to a *shut-in of 13 million barrels of oil per day*, resulting in *600 million barrels lost* so far, with a potential *1 billion barrels lost* if the crisis continues into May.
2

Market Underreaction & $200 Oil Forecast

Despite the severe supply deficit, the market is not fully pricing in the disruption, partly due to *Trump's verbal interventions*. Rory's model suggests oil could hit *$200 a barrel by June* if the situation doesn't resolve.
3

Oil Market Fundamentals

Key concepts include the *42-gallon barrel* as a unit, *~105 million barrels/day* global consumption, the shift from "peak oil supply" to "peak oil demand," and the significance of *backwardation* in futures as a sign of market tightness.
4

Geopolitical Stalemate

Both the US and Iran believe they are "winning," prolonging the crisis. While the US is relatively energy secure, *consumers will still feel price pain*, and *US allies in Asia* are highly vulnerable.
5

Accelerated Energy Transition

Long-term, this crisis is *unambiguously negative for oil demand*, expected to accelerate *electrification* and push peak oil demand to the *mid-to-late 2030s*, shifting focus to affordability and risk management.

💬 Notable Quotes

"We have all time high equity markets driven by the most energy intensive technology we've ever developed in the middle of the largest energy shock in history. It's a very, very funny gesture of position."

— Rory Johnston
"The curve right now, all it's telling me were really, really fricking tight."

— Rory Johnston
"My fair value model... showed that you can make a case, a pretty strong case... that puts us near $200 a barrel by the end of June should this persist."

— Rory Johnston