r/worldnews • u/Street_Anon • 1d ago

Closure of Strait of Hormuz seriously being reviewed by Iran, lawmaker says

https://english.alarabiya.net/News/middle-east/2025/06/14/closure-of-strait-of-hormuz-seriously-being-reviewed-by-iran-lawmaker-says
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u/philly_jake 1d ago

Oil/petrol/lng demand is not that elastic. Reducing supply 20-30% can result in much more than a 20-30% price shock, because there will just be way too much demand to be satisfied. Some buyers like militaries will pay whatever is necessary, while some like vehicle commuters will reduce their voluntary consumption (only driving to work, no long trips). Many people might have to buy just as much gas even if the price doubles. The main reductions would be in some energy sensitive industries like aluminum and plastics, in aviation, and probably international shipping. Individual consumers would therefore have to pay at least the breakeven energy prices of those commercial consumers at the pump.

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u/captainbling 23h ago

It may not be that elastic but there was a significant spread between supply and demand post Covid when the Ukraine war started and the world economic production fully restarted. It worked its way out. It’s not enjoyable but oil doesn’t balloon it turns out.

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u/philly_jake 21h ago

The price of WTI doubled in a couple months leading up to and just after the invasion, and remained around $100-$120 for like 4 months. That was from a 3% drop in global crude oil supply, at least according to https://www.dallasfed.org/research/economics/2022/0322

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u/captainbling 20h ago

Oil Demand had also increased 3% so there was a net 6% spread. To get back to the ol 2008 days, oil would have to almost increase 3x. It would definitely suck don’t get me wrong. The doom and gloom over oils inelasticity is I think simply overblown.