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Gas Tops $4 as Oil Market Buffers Are Exhausted
At 1:20 · chapter starts 1:07
With the Strait of Hormuz still closed, NPR's Windsor Johnston reports on a new energy price spiral that experts say is structurally different from earlier ones. Bob McNally, founder of the Rapidan Energy Group, tells NPR that the previous disruptions were cushioned by two factors — strategic inventory drawdowns and a sharp drop in Chinese oil demand — both of which have now been exhausted [1] — Bob McNally "We've had these inventories that we drew down, and we had China go on a crash diet. Going forward, the price mechanism will have to do more…" 01:34 . That means the only way markets can rebalance supply and demand going forward is through higher prices, which feed directly into consumer inflation. Compounding the problem, experts warn that damage to major Saudi Arabian oil facilities, inflicted during the conflict, could take months or even years to fully repair. The global oil market is, in McNally's framing, without a safety net.
The national average price for a gallon of gas has climbed back above $4 as Middle East fighting drives oil prices higher.
The national average gas price has crossed $4 a gallon again — a direct casualty of the U.S.-Iran conflict and the closed Strait of Hormuz. Experts say this surge may be more painful than the last, because the buffers that softened previous shocks are now gone.
The strategic inventories are depleted. China already slashed its oil demand. Now, with no buffers left, only rising prices can rebalance the global oil market if Hormuz stays shut. Rapidan Energy's Bob McNally says this latest energy shock could be far more damaging than previous ones.
Experts warn damage to major Saudi oil facilities could take months or years to repair, leaving global markets with fewer options.
Damage to major Saudi Arabian oil facilities from the conflict could take months or even years to fully repair. With Hormuz still closed and inventories drawn down, the global oil market faces a prolonged period of tight supply and elevated prices, experts warn.
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