🇺🇸🇮🇷 Oil is above $100, but the real danger may be what happens to diesel
I had an interesting conversation with financial analyst David Lin about what oil markets are telling us as tensions with Iran rise again.
Brent is trading around $107 a barrel, and I'm trying to understand whether investors are preparing for another short confrontation or something much worse.
David raised a problem that I think deserves more attention.
It's not simply how much crude oil the world can produce. It's how much of that oil can actually be refined into diesel, gasoline and other products.
He points out that major refining countries are already operating close to capacity. That leaves very little room to compensate if Houthi attacks continue damaging Saudi Arabia's energy infrastructure.
And diesel matters enormously.
It powers the trucks moving goods, the machinery producing them and much of the infrastructure keeping global supply chains functioning.
David says those higher transportation costs haven't yet appeared significantly in American grocery inflation data, although trucking companies are already reporting that they're passing them along.
We also looked at something curious in the markets.
Technology stocks have been weakening while investors move toward bonds, utilities, healthcare and other defensive assets.
David isn't calling an AI crash. But he sees a noticeable shift away from risk.
What I found most interesting was our disagreement about oil prices.
I worry that $107 oil reflects expectations of another major escalation with Iran.
David thinks the price also reflects today's unusually expensive shipping conditions, even as tanker traffic through Hormuz has reportedly recovered substantially.
Both explanations matter.
The next economic shock might not come from oil disappearing from the market, but from the cost of moving and refining what's still available.
@davidlin_TV
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