FLASH
Shkruar nga Christof Rühl
The modern, integrated oil market is much more capable of absorbing shocks than is commonly thought...
Geopolitical instability is on the rise, and with it, economic warfare is intensifying. Traditionally, oil has been one of the most widely used weapons to damage an adversary's economy. However, recently, this weapon seems to have lost some of its impact.
The intermittent closures of the Strait of Hormuz have become increasingly difficult to monitor, but the prospect of tighter oil supplies and higher prices has had only a limited impact on the global economy. Inflation rates have not risen significantly, economic growth forecasts have remained relatively positive, and financial market volatility appears to stem from other factors. Stagflation may remain a risk, but it is no longer commonly seen as a phenomenon driven primarily by oil prices.
Why this subdued reaction? In short, because the modern, integrated oil market is much more capable of absorbing shocks than is commonly thought, and because the weight of oil in the global economy is much smaller than it once was.
The recent crisis came at a favorable time. Global oil production exceeded consumption. Reserves, including China’s strategic reserves and unregistered quantities stored in tankers, were large. A rapid reorientation of global trade flows, including the use of pipelines that bypass the Strait of Hormuz, helped to cushion the impact of the initial price surge.
These alternatives continue to be available. In addition, other forms of supply-side response are also emerging, through the gradual increase in production in other regions, the expansion of pipeline capacity, and the reconfiguration of global refining and processing capacity.
However, such a large-scale disruption also requires a demand-side response. According to the International Energy Agency (IEA), oil demand fell by almost 5 million barrels per day in the second quarter of this year, or about 5 percent of global consumption. This decline is not caused by a slowdown in economic activity. For now, it reflects an improvement in the efficiency of using oil to produce goods and services, rather than a recession that is reducing demand for oil.
Oil intensity, the ratio of oil consumption to Gross Domestic Product (GDP), expressed in barrels per dollar of GDP, is the broadest measure of the productivity and efficiency of oil use. Historically, this indicator has improved significantly and consistently since the oil market crises of the 1970s. This improvement matters because it means that oil prices would have to rise much higher to cause the same economic damage that they would have done without this efficiency increase.
For example, current oil prices, adjusted for inflation and efficiency gains, would have to be about four times higher to reflect the shock that followed the Iranian Revolution of 1979. This is a very large difference and explains to a significant extent why the global economy has not reacted more strongly to oil price fluctuations after the wars in Ukraine and Iran. Within the current price range, lower oil intensity implies a lower risk of recession or inflationary pressures, reducing the need for central banks to intervene in response to rising prices.
A look at the improvements already achieved in oil intensity shows how sustainable this balance is. Combining data for the first half of 2026 with World Bank and International Energy Agency forecasts for GDP and oil demand in the second half of the year shows potential efficiency savings: GDP projected for this year will require about 3.6 million barrels of oil per day less than would be needed if oil intensity had remained at 2025 levels.
However, the situation is not entirely positive. The reduction in oil intensity is also the result of eliminating its less efficient uses, that is, unnecessary consumption or that which could be easily replaced. As a result, the barrels that continue to be consumed support activities of greater economic importance. If prices were to rise to the levels necessary to cause a serious shock, the damages would be much greater. They would be measured not only in terms of loss of purchasing power, but also in terms of the cost of interrupting or damaging economic activities.
Assuming oil flows that continued even during the height of military operations in the Strait of Hormuz, and accounting for alternative pipeline routes, increased supply outside the Gulf region, use of reserves, and other adjustments, the result is a shortfall of about 5 to 7 million barrels per day for the remainder of this year. Efficiency savings that have already been realized reduce this gap to about 1.5 to 3.5 million barrels per day.
This is roughly the volume that needs to be compensated for either by lower demand, or by higher exports passing through the Strait of Hormuz, or by a combination of both. This increase above the current minimum level of shipments does not constitute a major obstacle to daily traffic through the strait. Moreover, it leaves considerable room for volatility, including current military developments and stalled negotiations. In practice, both sides still have considerable room for maneuver before the situation deteriorates and the consequences for the global economy become serious.
Unfortunately, this is not a reason for optimism. The limited consequences so far could become an incentive for even greater disruption if they encourage higher risk-taking in the future. The danger is that an economy less vulnerable to oil price shocks could encourage policymakers to take more reckless actions. Markets may welcome the resilience of today’s economy. But that does not mean that politicians will show the wisdom necessary to avoid pushing the system beyond its new limits./ Adapted from “Pamphlet” by “FinancialTimes”
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