How long before petrol prices return to pre-war levels?

[00:00:00]now with Kristof Ruhl, who joins me from London. Kristof is a senior research scholar at Columbia University's Center on Global Energy Policy. Welcome to you, Kristof. So, we've seen initial drops in oil prices, but I mean, if we go to the you know, if you go to fill your car up, petrol prices are still well above pre-war levels, and there's a lot of obstacles. Physically, there are still mines in the strait. So, how long do you think it will be before we see petrol prices back to pre-war levels?

[00:00:27]>> I think it is now really really just a function of politics.

[00:00:32]If there is reason to suppose that the traffic normalizes in the Strait of Hormuz, if we look at all the adjustments which have already taken place globally of producing more jet fuels, of having more diesel, if you look at what has happened on the supply side of producing more crude oil, then the adjustment will surprise everyone by being very rapid.

[00:00:54]But, as your whole contributions have shown right now, politics are not in place. Nobody knows about mines. Ship owners are careful.

[00:01:03]Uh Iran Iran may still threaten to set an example by showing that they can blow up a ship, delaying everything further.

[00:01:10]So, in this atmosphere of uncertainty, it's really not so much a matter of energy markets and more a matter of perceptions, expectations, and policies.

[00:01:20]What is clear, however, is that even in the worst case, uh the world economy will not collapse tomorrow because there are still inventories, and there have been adjustments taking place already.

[00:01:31]>> Iran's already threatening that if the attacks on Lebanon don't stop, they might close the Strait of Hormuz again.

[00:01:36]So, I mean, all the improvements we've seen in oil prices, presumably, they're going to be completely undone uh within hours if if Iran carries through such a threat. So, have any measures been put in place after seeing this disaster economically unfold to make sure that this doesn't happen again or in the future or to mitigate it, at least?

[00:01:56]>> It's too short The time was too short to really put uh decisive measures in place, but yes, there are have been adjustments. They have been on the supply side rerouting, more oil being transported by pipeline through Saudi Arabia, through the UAE, by truck from Iran. But on the supply side, these measures, you know, are small and it takes time for oil production to increase in the Americas and in other places, which is taking place. And if you just fast forward 1 year, then we have the UAE building another pipeline, promising to finish it by 2027, and already having left OPEC, so they can throw a lot of additional capacity on the market if they get it out, if the straight straight is still closed through this new pipeline.

[00:02:40]The more important short-term adjustments have happened on the demand side. And here it was really quite amazing how the shock hit first in Asia and in particular fuels and industrial fuels and in and jet fuels and how the markets were worked very fast to adjust it. Let me give you just one example.

[00:02:59]There were always these complaints that gasoline prices, in particular in the US, increased so much and increased actually faster than in Europe and people were saying, "How can this be?"

[00:03:08]And and were taking it as a as a message of disaster. The truth was that US refineries switched in producing jet fuel because globally jet fuel was impacted by this crisis and the closure of the straight much more than gasoline.

[00:03:22]And so they produced jet fuels and gasoline went up in price because they didn't produce it anymore, but they followed prices. Then what looked very bad when you looked at the US in isolation, looked very good when you looked at the global refining market. So these adjustments are taking place and they, together with still strong inventories and in particular with China having built up a huge strategic reserve, will prevent disaster from coming as fast as people expected it.

[00:03:50]But of course, you know, at the end of the day, if what you describe happens and the strait is closing again, you'll see prices you see the whole game repeating itself again.

[00:03:59]>> Yeah, let's hope that doesn't happen for everybody's sake. Christoph, good to speak to you. Christoph Ruehl from Columbia University Center on Global Energy Policy.