The price of oil has plummeted overnight. The one at the gasoline pumps will remain the same

Just 24 hours. That’s how long it has taken the global oil market to go from historic panic to almost euphoric relief. On Monday, a barrel of Brent – ​​the benchmark in Europe – was close to $120, its highest level since the Russian invasion of Ukraine in 2022. It seemed the prelude to an imminent recession driven by the war between the United States, Israel and Iran. However, today we woke up with crude oil plummeting, reaching below 90 dollars.

And no, there is no peace treaty signed in Geneva, no withdrawal of troops, nor the reopening of maritime trade routes. Everything has depended on the president of the United States, Donald Trump, assured the chain CBS News that the war with Iran was “virtually complete” and promised reporters that the conflict would end “very soon.” And so, by the art of discursive magic, the price has begun to fall.

The nonsense of a market driven by headlines. What has happened these days gives a good account of the current state of the financial markets: they operate based on immediate speculation, not on physical reality. As the analysts summarize cited by Financial Timesthis stock market reaction is known as Taco trade (acronym of Trump always chickens outor “Trump always chickens out”). Investors don’t believe the war is really over; They simply assume that Trump needs to lower the price of gasoline at all costs so as not to sink in the legislative elections.

In fact, to force this price drop on the screens of Wall Streetthe White House has had to resort to desperation. Trump has even suggested that he will temporarily lift oil sanctions on some countries — including the possibility of easing the punishment for Russia itself— and even the G7 has considered releasing strategic reserves emergency. The financial market bought the headline and the price of a barrel fell. But the real world tells a very different story.

Reasons to distrust the optimism of the stock market. It is logical to view this price drop with skepticism. The Brent chart can go down as much as it wants on investors’ screens, but the real logistical problem remains intact. He Center for Strategic and International Studies (CSIS) warns that the threat is real and palpable:

• The great logistical bottleneck: The Strait of Hormuz remains blocked. This has taken 20 million barrels a day out of circulation.
• The physical danger: Iranian speedboats, naval mines and drones prevent oil tankers from sailing.
• Collapse on land: The situation is so extreme that, since ships cannot sail, storage tanks on land have been filled to the brim, forcing wells to be closed.

Furthermore, the supposed unilateral peace announced by Trump clashes head-on with Tehran’s position. According to Financial TimesIran’s Revolutionary Guard assures that its armed forces “are waiting for the US Navy.” As analyst Kurt Cobb points out in oil priceIran defines victory as the survival of its regime, so a negotiated cessation of hostilities is, today, a chimera.

The “rocket and boom” effect at the pump. This is where macroeconomics collides with citizens’ pockets. It doesn’t matter if the barrel of Brent drops overnight in international markets, you won’t see that relief today at the gas station. As my colleague Alberto de la Torre explained a few days ago, in Xatakathe fuel market suffers a very particular effect:

• Skyrocket: When the supply chain falters, the price skyrockets quickly. Gas stations act in anticipation and raise prices to cover the future cost at which they will have to replace that fuel, regardless of the fact that the impact of the barrel of Brent is not yet real on their purchases.
• Drops like a feather: When the barrel drops in the stock market, the drops at the pump last for weeks or months. There is very little room for maneuver, a lot of caution in case war breaks out again, and a clear resistance to lowering prices at the same dizzying pace at which they rose.

And why does diesel increase more than gasoline? The biggest loser of this crisis is the diesel customer, who in Spain has suffered increases of 20 cents per liter in just one week. Europe has a structural problem: we lost Russia as a major exporter, we have fewer operational refineries and we have a strong deficit. Furthermore, its demand is much more inelastic; The driver of a car can decide to take the subway if gasoline prices rise, but the freight transporter, the farmer or the industrial machinery must refuel with diesel, no matter what the cost.

The disbelief of the industry itself. The lack of faith in this “express peace” is shared even by the oil magnates themselves. In an insightful article published in oil priceDan Doyle, businessman in the sector fracking American, confesses that the shale industry is not buying this rebound. Despite having touched $100, oil companies are not hiring more drilling platforms or starting large extraction campaigns. They know that the “fast dollars of war will dissipate” and prefer to maintain strict capital discipline.

And although The Conversation remember that the United States is less vulnerable today to oil shocks because it exports millions of barrels a day, the psychological toll of seeing the scoreboard rise at the gas stations continues to damage consumer confidence globally.

Missile climbs, rowing descents. Today, the world’s stock markets have closed with green numbers. Investors have bought into the optimism of a press conference in Florida, and algorithms have adjusted the price of Brent downwards. However, geography remains stubborn. Large oil tankers remain anchored without daring to cross the Strait of Hormuz, maritime insurers continue to tremble and wells in the Middle East continue to close due to lack of space.

Tomorrow, when you approach the gas station in your neighborhood before going to work, the illuminated panel will remind you of the golden rule of today’s energy market: in times of geopolitical uncertainty, the downs travel in a rowboat, but the ups fly in a missile.

Image |Balázs Kadlicskó on Unsplash and Photo by Zbynek Burival on Unsplash

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