When will oil markets recover?
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What is the main topic discussed in this episode?
On the program today, oil for a bit, tariffs for a bit, and then some economic odds and ends from American public media. This is Marketplace.
In Los Angeles, I'm Kai Risdahl. It is Thursday. Today, this one is the 2nd of April. Good as always to have you along, everybody. Well, among the many, many words the president spoke in his 19 minute speech last night were words that indicated this war is going to go on for another two to three weeks. So mid to late April, before we see some semblance of a resolution, whatever that might look like. What it definitely is not going to look like is the global oil market rubber banding back to normal overnight. So we asked Marketplace's Elizabeth Troval to play out our short-term economic future.
Imagine it's mid-April. Military actions against Iran have stopped. Now?
The bigger question facing the global economy is what will the status of the strait be?
Gregory Brew with Eurasia Group says the next milestone is opening up the Strait of Hormuz, which Iran now controls. And there's a lot TBD on how and when that might happen.
Will volumes recover to such an extent that goods can come and go the way that they were before? What kinds of risks will still exist?
The future of the Strait looks messy, says Joe DeLauro with Rabobank.
The strait will still take months to clear if Iran even wants it to be open. And then on top of that, you have refinery damage, pipeline damage and production shut-ins.
All that oil production that is turned off during wartime can't get turned back on overnight, even in an optimistic scenario, says Claudio Gallimberti with Reistat Energy.
Nothing in terms of production is going to happen until May.
So how long will it take to get to pre-war production?
The general rule is... It's going to take as much time as the outage duration.
If it's out two and a half months, it will take another two and a half months to get back to normal. All of this means that for prices, we won't see barrels in the 60s anytime soon. Gregory Brew again.
It's very unlikely that the price of crude drops below $80 a barrel at any point in 2026, both due to the size of the physical disruption that's taken place and the ongoing risk premia stemming from the uncertainty.
And since every day this goes on, we have less physical oil out in the world, there's also the question of building back up reserves and inventories. Dan Pickering is with Pickering Energy Partners.
What factors will influence the stabilization of oil supply?
The timing it takes to get back to normal and to rebuild those drawn-down inventories and to get all the oil where it needs to be is really challenging. So we're going to be dealing with this through the summer driving season into the fall.
For Americans, he expects gas prices will be well above $3 a gallon through the rest of the year. I'm Elizabeth Troval for Marketplace.
Wall Street today. Honestly, I don't know what to tell you. The major indices opened deep in the red after the president's speech last night and then finished within either side of spitting distance of even. We will have the details when we do the numbers.
Oil traders do seem to have a more firm grip on the risk environment now than stock traders do. Crude prices, that is both benchmarks, solidly back over $100 a barrel today. And yet, producers in the Permian Basin, the pumping heart, if you will, of the American oil sector, They seem disinterested. According to a survey by the Federal Reserve Bank of Dallas that was fielded in mid-March, just 21 percent of oil executives in Texas and surrounding states say they are planning to significantly increase the number of wells they're going to drill this year. Half of them say they're not planning to drill more at all. Daniel Ackerman made some calls out to West Texas to see what's going on. Usually, rising oil prices have a predictable impact on oil producers.
To incentivize a greater level of supply. That's Econ 101 right there.
But Carr Ingham, president of the Texas Alliance of Energy Producers, says drillers in the Permian Basin don't seem to be ramping up production right now.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:02–2:55
2
What factors will influence the stabilization of oil supply?
2:55–11:30
3
How long will gas prices remain elevated after military actions?
11:30–23:25
4
Why are Permian Basin rigs not increasing production despite high oil prices?
23:25–26:57