Publications: Notes at the Margin

Disruptions Real and Fictitious; $300 Crude A Possibility (May 21, 2018)


Today we confront a real disruption prompted by actions taken by ConocoPhillips and a fictitious disruption associated with President Trump's announced plan to reinstate sanctions on Iran. Furthermore, a second real disruption, possibly the greatest of all, is coming, brought about by the new International Maritime Organization regulations that require shippers to use fuel containing less than 0.5-percent sulfur beginning in 2020.

The two real disruptions caused by ConocoPhillips' move to seize Venezuelan assets in the Caribbean and the IMO could push crude prices to $300 per barrel. While this number seems extraordinary, one can make a strong case for the outcome, especially given the recent excellent studies on the IMO regulation’s potential impact on refiners.


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