{"id":3878,"date":"2026-07-30T19:12:05","date_gmt":"2026-07-30T19:12:05","guid":{"rendered":"https:\/\/interstatelogisticshubs.com\/?p=3878"},"modified":"2026-07-30T19:12:05","modified_gmt":"2026-07-30T19:12:05","slug":"the-paper-price-of-oil-is-a-fiction","status":"publish","type":"post","link":"https:\/\/interstatelogisticshubs.com\/?p=3878","title":{"rendered":"The \u2018paper\u2019 price of oil is a fiction"},"content":{"rendered":"
\n

Russia accounted for about 10 percent of the world\u2019s oil supply when she invaded Ukraine in February 2022.\u00a0\u00a0Western countries promptly sanctioned Russian oil, and prices shot up to almost $140 per barrel.\u00a0\u00a0Russia turned around and sold its oil to India, who refined it and sold it to Europe.\u00a0\u00a0Most of that oil had merely been re-routed, not taken off the market.<\/p>

Read more Is Kristi Noem adding any kind of value to President Trump as special envoy to his Shield of the Americas initiative?<\/a><\/p>\n

When the U.S. attacked Iran in February, WTI (West Texas Intermediate) oil traded around $68\/barrel.\u00a0\u00a0Four months later, over $1.3 billion barrels of oil had been removed from the market.\u00a0\u00a0From mid-March to mid-June, oil prices hovered between $80 and $100\/barrel, then dropped to the $70\u201380 range from mid-June through the end of July.\u00a0\u00a0Why have oil prices not skyrocketed after almost 5 months of the disruption of 20 million bpd (barrels per day) of war and closures of the Strait of Hormuz?<\/p>\n

Early on, in mid-March, Trump removed sanctions on Russian oil for one month, which added 200 million barrels of oil to the markets.\u00a0\u00a0Then, a few days later, Trump lifted sanctions on some Iranian oil: \u201cTreasury Secretary Scott Bessent announced the issuing of a narrowly tailored, short-term authorization permitting the sale of Iranian oil currently stranded at sea.\u201d<\/p>\n

It\u2019s been widely reported that the world has been burning through its strategic oil reserves, and that has played a significant role in keeping oil prices from going through the roof: \u201cThe world has absorbed with surprising ease the loss of over a billion barrels of oil supply since the Iran war began, but, with long-term peace elusive and buffer reserves now drained, it still faces the looming risk of future price spikes.\u201d<\/p>\n

China in particular blunted the expected rise in global oil prices (and surprised the world) by tapping into its massive strategic petroleum reserves of an estimated 1.4 billion barrels, thereby slashing its oil imports by 50 percent \u2014 from 10 to 5 million bpd.<\/p>\n

WTI and Brent prices are short-term futures prices, not spot prices for what oil is sold for on a given day.\u00a0\u00a0In the real world, buyers have been paying anywhere from around $30 to $60\/barrel more than published prices, for taking physical delivery of oil (see here, here, and here).\u00a0\u00a0These marked up prices are especially high for refined products such as gasoline, diesel, aviation fuel, and the diverse world of petrochemicals.<\/p>

Read more In Ohio, poker night is fine, but praying with friends is forbidden<\/a><\/p>\n

The chaotic, unpredictable, rapidly changing nature of war can explain much, but I think not all, of this disconnect between \u201cpaper\u201d futures prices and physical oil prices.\u00a0\u00a0That is, to what extent are A.I. trading algorithms are affecting oil prices?<\/p>\n

\n

Major energy companies, investment banks, sovereign wealth funds and governments now rely on advanced algorithms to analyze geopolitical risks, forecast oil prices, assess security crises and manage energy supply chains. [snip]<\/p>\n

Artificial intelligence systems are now able to process millions of variables simultaneously, ranging from satellite images of oil tankers and strategic reserves to weather patterns, military tensions, cyberattacks, interest-rate fluctuations and even social media sentiment.<\/p>\n<\/blockquote>\n

A few weeks ago, CNN aired a montage of President Trump announcing deals with Iran 39 times.\u00a0\u00a0Those pronouncements, dispersed to media outlets throughout the world, are among those \u201cmillions of variables\u201d analyzed by A.I. trading algorithms.\u00a0\u00a0Each algorithm knows that all the other algorithms know that those statements, whether true or false, will pull stocks up and push oil down for the next day\u2019s trades<\/em>.\u00a0\u00a0If mob psychology drives stock markets, then the psychology has been automated.<\/p>\n

Oil is front and center of this war, and its slow-motion humanitarian ramifications are being underestimated by real-world energy costs that are higher than we\u2019ve been led to believe.<\/p>

Read more There Is No Justice in Minnesota<\/a><\/p>\n

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\"<p><em>Image:<\/figure>\n<\/p>\n

Image: lalabell68 via Pixabay, Pixabay License.<\/em><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

Russia accounted for about 10 percent of the world\u2019s oil supply when she invaded Ukraine in February 2022.\u00a0\u00a0Western countries promptly sanctioned Russian oil, and prices shot up to almost $140 per barrel.\u00a0\u00a0Russia turned around and sold its oil to India, who refined it and sold it to Europe.\u00a0\u00a0Most of that oil had merely been re-routed, […]<\/p>\n","protected":false},"author":1,"featured_media":3876,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,21],"tags":[1570],"class_list":["post-3878","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-foreign-policy","category-iran-war","tag-related-topics-iran-war-oil"],"yoast_head":"\nThe \u2018paper\u2019 price of oil is a fiction - Interstate Logistics Hub<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/interstatelogisticshubs.com\/?p=3878\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The \u2018paper\u2019 price of oil is a fiction - 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