“The Persian Gulf is the us-east-1 of the global energy trade” — best line I’ve hear today. Made me chuckle. That’s cool that you guys are getting into the oil crisis.
What strikes me most is how the Strait situation exposes the same fallacy we see in tech architecture reviews: everyone acknowledges the single point of failure, nobody budgets for the redundancy until after the outage.
This is the best explainer on the physical oil market I've read since the crisis began. The CUDA analogy for Gulf refinery lock-in is perfect — anyone who's worked in energy trading knows that crude quality mismatch is the story that headline prices completely miss, and you've made it accessible to an audience that intuitively understands vendor lock-in.
A few things I'd add from a decade on the trading and risk management side:
The WTI-Brent-Oman spread dislocation you outlined is exactly right, and it's worth emphasizing that these aren't just numbers on a screen — every dollar of spread dislocation represents a real cargo economics decision. Right now physical traders are running voyage calculations on routes that haven't been economically viable in years. US Gulf Coast to Southeast Asia via the Cape of Good Hope is a 45+ day journey that only pencils out because the arb is historically wide. The moment that arb narrows, those cargoes stop flowing and the backfill disappears.
The 700 million barrel production gap in even the best-case scenario is the number that should be keeping people up at night. Markets are pricing in a quick resolution, but the production restart curve isn't symmetrical — shutting in a field takes days, bringing it back safely takes weeks, sometimes months, depending on reservoir management decisions made during the shutdown.
Your point about condensate and petrochemicals is critically underappreciated. Most people hear "oil crisis" and think gasoline. They don't think about the PET in their water bottle or the butadiene in their kids' shoes. The downstream chemical impact is where this crisis gets truly global, regardless of whether a country imports crude or not.
Exceptional work, Michael. This is the kind of analysis the energy conversation needs more of.
Develop a stomach for war and a Business head for war; the long peace is over.
“The Persian Gulf is the us-east-1 of the global energy trade” — best line I’ve hear today. Made me chuckle. That’s cool that you guys are getting into the oil crisis.
Great analysis. The chaos will only increase.
What strikes me most is how the Strait situation exposes the same fallacy we see in tech architecture reviews: everyone acknowledges the single point of failure, nobody budgets for the redundancy until after the outage.
This is the best explainer on the physical oil market I've read since the crisis began. The CUDA analogy for Gulf refinery lock-in is perfect — anyone who's worked in energy trading knows that crude quality mismatch is the story that headline prices completely miss, and you've made it accessible to an audience that intuitively understands vendor lock-in.
A few things I'd add from a decade on the trading and risk management side:
The WTI-Brent-Oman spread dislocation you outlined is exactly right, and it's worth emphasizing that these aren't just numbers on a screen — every dollar of spread dislocation represents a real cargo economics decision. Right now physical traders are running voyage calculations on routes that haven't been economically viable in years. US Gulf Coast to Southeast Asia via the Cape of Good Hope is a 45+ day journey that only pencils out because the arb is historically wide. The moment that arb narrows, those cargoes stop flowing and the backfill disappears.
The 700 million barrel production gap in even the best-case scenario is the number that should be keeping people up at night. Markets are pricing in a quick resolution, but the production restart curve isn't symmetrical — shutting in a field takes days, bringing it back safely takes weeks, sometimes months, depending on reservoir management decisions made during the shutdown.
Your point about condensate and petrochemicals is critically underappreciated. Most people hear "oil crisis" and think gasoline. They don't think about the PET in their water bottle or the butadiene in their kids' shoes. The downstream chemical impact is where this crisis gets truly global, regardless of whether a country imports crude or not.
Exceptional work, Michael. This is the kind of analysis the energy conversation needs more of.
Energy is life. The reduction of it — in any vector — reduces life. Duh.
No bueno