Oil supply hit is unprecedented beyond Covid, Matthew Klein notes

Oil supply hit is unprecedented beyond Covid, Matthew Klein notes
Markets calm on unusual oil supply hit

Markets are maintaining a calm stance despite the current oil shock causing an unprecedented hit to supply volumes outside of Covid. Matthew Klein observes that previous oil shocks in 1973 and 1979 involved far larger price increases than what has been seen so far, but the present situation is notable for its significant reduction in supply.

The latest oil shock and its implications for global supply chains prompt a broader consideration of risk dynamics in energy markets—a theme Klein explored while assessing how the Brent futures curve provides a risk premium for investors positioning in distant contracts. Additionally, this episode raises questions about the interplay between trade policies and external balances, reminiscent of Klein’s analysis on the effectiveness of tariffs in shaping the U.S. balance of payments as future scenarios unfold.

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