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• ↓ Why Oil Shortages May Bring Lower Prices–and Recession
• ↓ [1] Reserves of already-pumped US oil have dropped to concerningly low levels.
• ↓ [2] Perhaps because of concern about low buffer supplies, the US has negotiated a deal with Iran that seems unfavorable to the US.
• ↓ [3] Trump or another leader cannot restart the war against Iran and expect to do any better.
• ↓ [4] One motivation for attacking Iran might have been to raise oil prices to a higher level.
• ↓ [5] Oil prices since the war started on February 28 have not bounced very high. Recently, they have tended to fall back, close to their pre-war level.
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"There have recently been many warnings about near-term oil shortages stemming from the conflict in Iran. Most analysts assume that shortages mean higher prices. As I will explain, the dynamics of a self-organizing economy suggest the opposite outcome — lower prices, deepening recession, and shortages of goods and services that have little to do with price."

"Rather than high prices, my major concerns are recession and the disappearing availability of goods and services that we rely on. This might be similar to the empty shelves that many stores experienced in 2020 and 2021. There may also be new government restrictions, intended to work around the reduced oil supply in a way that will allow essential services to continue to operate normally. Oil prices are likely to fall below $40 per barrel, as they did in 2020 with Covid restrictions."

"In this post, I will try to explain why this counterintuitive outcome — shortages leading to lower prices rather than higher — is what the self-organizing economy tends to produce. Along the way, I will look at the current state of oil reserves, why the conflict with Iran is unlikely to be quickly resolved, and what the price behavior of oil since February 28 tells us. I will also step back to consider the broader picture: why war can seem like a solution to struggling economies, and what the 2020 Covid experience might teach us about what lies ahead."

"On June 17, President Trump said, “We will run out of reserves in about four weeks without a deal.” According to the article, we are not certain whether Trump intended to apply this statement to US or world emergency reserves."

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Why Oil Shortages May Bring Lower Prices–and Recession

[1] Reserves of already-pumped US oil have dropped to concerningly low levels.

[2] Perhaps because of concern about low buffer supplies, the US has negotiated a deal with Iran that seems unfavorable to the US.

[3] Trump or another leader cannot restart the war against Iran and expect to do any better.

[4] One motivation for attacking Iran might have been to raise oil prices to a higher level.

[5] Oil prices since the war started on February 28 have not bounced very high. Recently, they have tended to fall back, close to their pre-war level.