Publications: Notes at the Margin

The 2026 Oil Market Disruption (May 4, 2026)

 

The general consensus is that this is the worst oil market disruption since World War II. By our estimates, the supply reduction is the largest since the 1973 embargo, except for the output reduction that oil-exporting countries made in 2020 to manipulate prices. When one compares the current disruption to the twenty-two previous events, the price increases today are moderate. Based on historical data, crude should now trade for around $200 per barrel.

 

Given the magnitude of the current supply reduction, one might have expected prices to rise quickly, as they did in 1973. One might also expect them to rise further in May if the 1973 analogy holds. This would put Brent at $225 per barrel on May 31. However, this crisis is not the same as the 1973 disruption, the 1978-80 crisis, or the 2022 crisis.

 

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