Publications: Notes at the Margin

Energy Markets: Is This the New Normal? (August 10, 2026)

 

Energy markets are entering a “new normal.” The prolonged closure of the Strait of Hormuz has forced buyers to seek alternative sources for oil and natural gas. Diesel supplies have also been cut. China has seized the opportunity to boost exports of electric cars and heavy-duty trucks. Oil firms have increased exploration and production in areas outside the Persian Gulf. Many of these demand and supply changes will be permanent. For example, Asian firms that had planned to use natural gas to generate electricity have turned to renewables and sold their gas turbines to US data centers. In the future, the global need for oil and gas will be less than projected.

 

As a consequence, the strait’s reopening and the repair of Russian oil facilities will lead to much lower oil and gas prices. Vulnerable buyers such as large refining companies understand this and are already limiting forward purchases.

 

Recently, Saudi Aramco CEO Amin Nasser told Bloomberg that oil demand would surge when the strait reopened, asserting that “even if shipping resumes immediately, rebuilding the depleted inventories could take around 18 months, based on additional supply of 2.1 million barrels a day.”[i] Nasser is wrong. Inventories will not be rebuilt at current prices. Given the changes that have occurred, they may never be rebuilt.

 

This is the new normal.

 

 

 

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