This is puzzling to me. Empty tankers are waiting in the Strait to fill up on oil from the USA until it is cleared of mines by our military. If we have so much oil that we can sell it to others, why have our gas prices spiked?
Oil is a global commodity.
Oil prices can rise despite high supply because prices are driven by future expectations, geopolitical fears, and production cuts, rather than just current inventory. Markets often fear future disruptions or calculate that demand is outstripping available refining capacity, driving up prices.
In essence, oil is a global market where market sentiment and expectations of future shortages frequently outweigh the reality of current supply.
Here is why prices rise during high supply:
- Geopolitical Fear Factors: Even if physical oil is available, threats of war, conflict in oil-producing regions (e.g., Middle East, Russia), or threats to key shipping routes (e.g., Strait of Hormuz) create panic, causing traders to bid up prices.
- Refining Bottlenecks: Plenty of crude oil (raw material) does not mean plenty of gasoline or diesel. If refineries are running at capacity, closed for maintenance, or damaged, fuel prices rise because they cannot turn the crude into usable products fast enough.
- Market Speculation: Financial traders buy futures contracts based on what they think prices will be. Speculators can drive up prices if they expect a future supply shortage or increasing demand, even if current supply is abundant.
- Transportation and Logistics: Physical bottlenecks, such as pipeline issues or tanker shortages, can prevent supply from reaching the market, creating local or regional shortages.