00:00 Speaker A
20% of the world’s oil flows through the straight of Hormuz.
00:02 Speaker A
doesn’t do any good bottled up inside the Persian Gulf.
00:05 Speaker A
So, for that 20% of the world’s supply to get to world markets, it needs to get through that straight,
00:10 Speaker A
which is for now completely closed.
00:13 Speaker A
So this is a gigantic shock to the oil market.
00:16 Speaker A
It’s maybe not as much for the world economy, which is the other part of the story.
00:20 Speaker A
Unfortunately for the US, the fact that we don’t import significant amounts of oil from the Persian Gulf doesn’t matter at all.
00:26 Speaker A
It’s a global market, the price of oil is the price of oil.
00:29 Speaker A
US oil companies benefit from higher prices, but that doesn’t do you and me any good.
00:32 Speaker A
One point to add here though is if we’re actually asking who gets hurt,
00:36 Speaker A
actually US consumers are hurt worse than European or Asian consumers, even though we produce a lot of oil and they don’t.
00:41 Speaker A
And the reason is that we just, you know, we drive big cars. We drive uh less fuel efficient vehicles.
00:47 Speaker A
We the US is a lot less oil intensive than it was in the ’70s, but it’s a lot more oil intensive than Europe or Asia.
00:51 Speaker B
And we drive more, I imagine, as well in terms of of of distance.
00:54 Speaker A
people are paying more at the pump, people are paying more for heating bills, while there’s an increased profits for oil companies, that’s not probably going to boost demand very much. So there’s a direct hit to demand.
01:00 Speaker A
And then you have this blow. I mean, although the inflationary impacts are probably going to be muted,
01:05 Speaker A
it might still be enough to mean that the Fed won’t cut rates.
01:08 Speaker A
So the effect on on capital markets on on yields is is not favorable.
01:13 Speaker A
The US economy is looking fragile.