EPU, VIX and GPR:
Figure 1: EPU (blue, left scale), 7 day centered moving average (bold red, left scale), VIX (green, right scale). Source: policyuncertainty.com, CBOE via FRED, and author’s calculations.
Figure 2: Geopolitical Risk Index (black), 7 day centered moving average (pink). Source: Caldara, et al., and author’s calculations.
Inflation breakeven and DKW estimates of 5 year inflation.
Figure 3: 5 year Inflation break-even/Treasury-TIPS spread (blue), DKW expected inflation estimate (red), both in %. Source: Treasury via FRED, Fed/DKW.
Volatility is still here.
While oil prices are down, the implied volatility of oil prices remains high. Here’s the CBOE oil ETF volatility index:
Figure 4: CBOE oil ETF volatility index. Source: CBOE via FRED.
Clever idea – there are press reports of cargo vessels in the Strait of Hormuz revising their electronic tracking data to show a relationship to China:
https://www.yahoo.com/news/articles/ships-brandish-china-links-weave-170821348.html
These vessels show a connection to China and then proceed through the Strait, assuming Iran won’t attack them. No indication so far whether China has asked Iran to allow “Chinese” vessels through, but it would make sense; let’s hope they have. There hasn’t been a surge of ship as a result of this trick, but a deal to let vessels with a link to China – ownership, crew, registration, cargo – through the Strait could go some way toward reducing the harm from this war on the Asia-Pacific region.
Speaking of the Asia-Pacific region, a new shipping worry, far from Hormuz, is making the rounds. How soon might a handful of ports in the Asia-Pacific run out of bunker fuel? It’s a problem that can be fixed, for the right price, but while waiting to fix it, shipments from those ports could get badly gummed up. Bottlenecks tend to make smaller problems into bigger ones.
Why would anyone in the US “hope” that oil going to China gets through the straits? So that China can continue to support this Iranian government which is the Islamic version of the Jim Jones cult? China has other options to buy on the open market… like every other nation. “Oh, but they need highly discounted Russian and Iranian oil.”
First, China-linked vessels aren’t necessarily oil tankers. If you’d bothered to read either what I wrote or the link, that would have been obvious. Poor reading skills seem to be a consistent weakness for you, Brucie.
Second, “Why would anyone in the US…”? Because, contrary to right-wing shibboleth, there is room in a free country for diversity of opinion. I don’t have to agree with neocon litmus tests. But you do you.
Because I have some understanding of how the U.S. economy works, I realize that lots of inputs to U.S. production come from Asia. Starving Asia starves U.S. production.
Man, you can be dense when you have your partisan hackles up, which is pretty much all the time.
“Because I have some understanding of how the U.S. economy works, I realize that lots of inputs to U.S. production come from Asia. Starving Asia starves U.S. production.”
Irrelevant. China’s input doesn’t mean that anyone should be “hoping” China gets it’s cheap oil from a regime that has killed Americans and its own citizens in large numbers for almost 1/2 century. Cheap goods be damned. We’ve already learned what reliance on China can mean with rare earth minerals. But, that’s beside the point. China can buy its oil at world prices like the rest of the world (except for the “fire sale” oil from Russia, of course). China’s production won’t starve; it just won’t feed the Iranian regime.
Oh, btw, https://www.fox26houston.com/news/first-new-us-oil-refinery-50-years-set-construction-texas-trump-says
“The refinery is specifically engineered to process American light shale oil (47° API), which is cleaner, more efficient and less costly to process than heavier imported crude.
Unlike many existing U.S. refineries that depend on foreign oil, the facility will not require imported crude, which strengthens U.S. national and economic security.
Key advantages of the refinery include the capacity to process 60 million barrels per year of 100% U.S. light shale oil, a strategic location at a deep-water U.S. port, enabling distribution to domestic and international markets and the production of some of the cleanest gasoline, diesel and jet fuel refined at scale in the U.S.”
That, of course, has nothing to do witht the current situation. But since California just shut down its last refinery, it will be keeping that new refinery busy once it comes on line.
the first new refinery in 50 yeas is a bit misleading. true, brand new facilities are rare, because they are very costly. we have expanded existing facilities to accommodate our supply needs at a cheaper cost than brand new facilities. new facilities are inefficient use of resources compared to expanding existing facilities. that is why new facilities have not been build. but capacity has increased tremendously.
there is a reason that us refineries do not process us crude. it is much more expensive and much less profitable. the shale crude can make gasoline, but that is about it. kerosene, diesel, and other by products are not available readily in volume from light crude. we use heavy sour crude because we make more product that sells. building a new gasoline refinery for light crude in the age of the EV is not a smart long term use of capital.
“Unlike many existing U.S. refineries that depend on foreign oil, the facility will not require imported crude, which strengthens U.S. national and economic security.” much of the world economy has benefited from the security subsidy that the us military provides to oil around the world. if that subsidy disappears due to me first mentality, then oil prices will continue to increase worldwide. this will prompt faster adoption of electric solutions to energy needs. just sayin.
Of course, China having to buy undiscounted oil on the open market would raise the price of oil for all countries, not just China. The one country that would love to see Iran successfully block the Straits would be Russia. For Putin, Iran’s cutting off oil to China, India and the West is good news. It just means more rubles to kill Ukrainians. Then again, most MAGA types are big Putin supporters.
There are now similar reports of cargo vessels revising their electronic tracking data to show a Russian affiliation.
My first take on Iran:
https://www.princetonpolicy.com/ppa-blog/2026/3/9/7-gasoline-wti-200-putin-in-trump-out
Steven, a lot of teeth gnashing but the supply of oil is pretty good right now. Prices are much lower than 2022.
Prices: https://oilprice.com
WTI CRUDE • 87.58 +4.13 +4.95%
BRENT CRUDE • 92.40 +4.60 +5.24%
3:20pm EDT
Supply: https://www.foxbusiness.com/economy/oil-spike-fades-markets-reassess-iran-war-supply-risks
Kharg Island is still intact and that means oil distribution can resume when the hostilities wind down. Whether they will depends on the outcome.
https://www.france24.com/en/middle-east/20260310-iran-us-israel-war-middle-east-kharg-island-oil-hub-infrastructure-strategic-importance-global-economy
The supply of oil “is pretty good right now” says a guy who has a demonstrated weakness with math and markets, and a dedication to repeating MAGA talking points. You link to an article full of factoids, but which neglects to add up the various effects to demonstrate that “supply is pretty good”. Quick question: How much of global oil production goes through Hormuz? If you have to look it up, you have no business pretending to know whether oil supply is tight.
Oh, and the guy quoted in the article takes a poke at Biden’s policies, when the U.S. was a net oil exporter during Biden’s presidency, and plenty of oil leases were never put to use because prices were low. That’s just political hackery – probably why you linked to it.
Brucie, you need to remember that readers of this blog have a better-than-faux-news understanding of markets, even if you don’t.
“The supply of oil “is pretty good right now” says a guy who has a demonstrated weakness with math and markets, and a dedication to repeating MAGA talking points.”
Duckie (or is it the “Big Quack”?), don’t you read anything except what you write?
• https://www.eia.gov/outlooks/steo/report/global_oil.php
• https://thehill.com/newsletters/energy-environment/5780057-us-other-countries-plan-to-use-oil-reserves/
• https://www.reuters.com/business/energy/saudi-red-sea-oil-exports-hit-record-high-march-shipping-data-shows-2026-03-10/
oil is at $95 and increasing this morning. if the supply of oil was pretty good right now, oil would not be at that price. at least if you believe in supply and demand economics. it was $65 a couple of weeks ago.
Tapping reserves is a sign that “supply is pretty good”? EIA modeling oil prices with a 20% reduction in global supply is a aign the “supply is pretry good”? What’s weong with you?
For those infamiliar with Brucie’s tricks, hmwhat he’s doing here is tossing up links that don’t support his argument, in the hope than some readers will take for granted that those links do support his argument. All the while, he pretends people who disagree with him are the ones who don’t know the facts. This is part of the faux news echo chamber playbook, aimed at people who aren’t up on the facts.
By my count, it looks like we may have 300-500 mb of excess crude oil inventory globally (depending on how we count China). With a gap of 20 mbpd, we crank through that 500 mb of excess inventory in less than one month.
For now, I think it’s fair to say that oil is trading on expectations, not actual balances. Within weeks, though, it will trade on balances if the Strait remains closed.