Fears that the world may be running out of oil have resurfaced as the ongoing Middle East conflict disrupts flows through the Strait of Hormuz, a critical artery for global energy trade. However, a new analysis from Goldman Sachs suggests that while supply chains are under severe strain, the situation is more nuanced than an outright global shortage.

According to Goldman Sachs, the immediate impact of the disruption has been most visible in Asia, where several countries rely heavily on Persian Gulf imports for refined products. The bank notes that many Asian economies source roughly half of their fuel supplies from the region, with some, such as South Korea and Singapore, depending on it for nearly three-quarters of their needs.

Despite these vulnerabilities, outright shortages have so far been limited. This is largely because countries have been able to tap alternative suppliers, draw on existing inventories, and curb exports to stabilize domestic markets. However, Goldman warns that this buffer may be temporary. By late March, Asia’s net oil imports had dropped sharply, indicating a growing strain as shipments from the Gulf slowed.

The report highlights that not all fuels are equally affected. Petrochemical feedstocks such as naphtha and liquefied petroleum gas (LPG) are already facing acute tightness due to lower inventories and more complex storage requirements. Meanwhile, prices for diesel and jet fuel have surged globally, reflecting both current supply constraints and precautionary stockpiling.

Goldman also points to rising evidence of stress on the ground. Several countries, including India and Thailand, have reported fuel rationing or supply disruptions, while governments in parts of Asia have introduced measures to manage consumption.

Still, the bank stops short of calling this a structural supply crisis. Large economies like China and Japan, which maintain substantial strategic reserves, are better positioned to weather the shock. The broader market, Goldman argues, still has flexibility through rerouted trade flows and inventory drawdowns.

In essence, the world is not running out of oil, at least not yet. But if disruptions in the Strait of Hormuz persist, localized shortages and price spikes could intensify, especially in the most import-dependent regions.
Source: Investing.com