The factoid thrown around is that roughly 20% of the world’s oil supply travels through the Strait of Hormuz. Since it closed, my local gas prices in one area of the US midwest have gone from $2.60 to now $4.10 presumably as reserves have been used up.

I could understand a 20~30% increase in price to correlate with the reduction in supply, but what are the economic factors that lead to what feels like such a disproportionate increase?

  • Krono@lemmy.today
    28·
    17 hours ago

    Think about all the oil you use as a regular person- for heating, transportation, fertilizer for your foods, etc.

    Now say the price goes up by 20%. Would you, in response, consume 20% less? Would you heat your home 20% less and eat 20% less and go to work 20% less? Of course not.

    The estimated 20% reduction in worldwide crude production means, somehow, somewhere, as a world we have to use 20% less oil. Then the question is, how high does the price have to rise to force people to consume 20% less?

    How expensive will it have to get to force people to heat 20% less and eat 20% less and drive 20% less? I don’t know, but it’s going to get worse, because we aren’t there yet.