An analysis has found that the oil supply disruption caused by the blockade of the Strait of Hormuz amounts to nearly 10% of global demand.
Oxford Economics, a UK-based research firm, said in a report released Wednesday that the Hormuz Strait blockade has cut approximately 10 million barrels per day of oil supply, the New York Times and other outlets reported. Given that global oil demand stood at about 104 million barrels per day before the war, the disruption represents a roughly 10% reduction in supply relative to demand.
Oxford Economics noted that even though Saudi Arabia and the United Arab Emirates are bypassing the Strait of Hormuz using energy pipelines, it remains difficult to offset a shortfall of this magnitude.
The report also estimated that while Brent crude prices have surged 79% since the outbreak of the war, global oil demand has fallen by only 2.4 million barrels. "For every 1% rise in price, consumption falls by just 0.03%," the report said. "Very large price increases only pull demand down by a very small amount."
Even accounting for the decline in oil demand and the release of strategic reserves, oil supply remains short by approximately 2 million barrels per day, Oxford Economics said. Under a scenario in which the war continues for six months and escalates across Red Sea and Persian Gulf infrastructure, the shortfall is projected to grow to 13 million barrels. "This would represent an unprecedented shortage amounting to 12-13% of oil consumption," the report said. "From this point, demand would decline not because consumers choose to consume less, but because fuel simply cannot be obtained."
The report proposed three measures to address the current oil supply-demand imbalance: price increases, use of strategic reserves, and rationing. It warned that if rationing were implemented, supply chains would collapse and economic activity would contract, potentially slowing global GDP growth to 1.4% this year.