Odd Lots – Javier Blas on Why Oil Could Go Much, Much Higher
Published: April 1, 2026
Hosts: Joe Weisenthal & Tracy Alloway | Guest: Javier Blas (Bloomberg Energy & Commodities Columnist)
Episode Overview
This episode dives deep into the current oil market crisis, sparked by the closure of the Strait of Hormuz and ongoing war in the Middle East. Joe and Tracy engage Javier Blas to untangle the dynamics behind oil pricing, government actions, the role of buffer stocks, refined product spikes, and the broader implications for energy, food markets, and the global economy. The conversation explains why the situation is tense – and why oil prices could go much, much higher, despite not having hit panic levels yet.
Key Discussion Points & Insights
1. Disconnect Between the Crisis and Oil Prices
Main idea: The scale of the Strait of Hormuz closure would previously have been seen as a worst-case scenario, but while oil prices are up, they're not at panic levels.
- (01:25) Tracy Alloway: “One of the weirdnesses of our current market moment is that you have all these oil analysts...yett, if you look at the actual price of oil...it's gone up...but it's not, it doesn't strike me as panic levels.”
- (01:56) Joe Weisenthal: “It started the year around 60...now at 115. So it's a huge move in some sense, but...not even at 2022 levels.”
- Governments globally, especially in East Asia, are already enacting rationing and emergency measures, even though the price response seems muted in comparison.
- (02:58) Joe: “There’s this disconnect between what’s going on in the financial world and what's going on in the physical world.”
2. Why Aren't Oil Prices Higher? The Buffers Explained
Javier Blas breaks down why we haven’t seen true panic in pricing, despite huge disruptions.
- (04:33) Javier Blas: "It's bad and it could get really bad...there are two elements...the size of the disruption and...the length...So far the disruption is relatively short lived. We've been a month, so that's one of the reasons why we are not at crazy high oil prices yet."
- Current market cushion comes from:
- Commercial inventories at refineries
- Strategic reserves (US, Europe, Japan, China)
- Pre-existing oversupply, including floating storage
- The proximity to the Strait matters: Countries nearest to the disruption (East Asia, Africa) feel the pain first; oil takes days/weeks to travel to further destinations like Europe and the US (06:00–08:38).
- Global oil market division: East of Suez (Asia, dependent on Middle East oil) vs. West of Suez (Europe, Americas—less immediate impact).
3. Could Some Countries Be Shut Out Entirely?
How bad could it get?
- (08:55) Tracy: "Could you get a situation where you can't get oil at any price in certain countries?"
- (09:00) Javier: "In an absolutely full blown crisis...yes, I think that we can get into a situation that no matter what you are offering for a barrel of oil, no one is willing to sell..."
- Extreme scenario: extensive export bans, nationalist policies, oil doesn’t move at any price.
4. Which Oil Benchmarks Matter, and Why Refined Products Are Key
- Market focuses on benchmarks (Brent, Oman, Dubai), but physical flows and grading matter.
- (10:16) Javier: “Brent is used effectively as shorthand for the average barrel in the world...but it's not really the average barrel and certainly not the average barrel that comes from the Middle East.”
- It's refined product prices (gasoline, diesel, jet fuel) that consumers actually feel, and these are where the extreme spikes are happening—especially jet fuel in Singapore (~$200/bbl, never seen before) (13:03).
- Notable quote (12:25): "If you look at the cost of diesel in Singapore...the price there is approaching $200 a barrel, which is something we have never seen..."
5. Why Are Refined Products Surging More Than Crude?
- Loss of refinery capacity, especially export-oriented refineries in the Middle East, matters more than just lost crude.
- (13:47) Javier: “We have lost not only a lot of crude oil production, but we have lost a significant chunk of refined production...the global trade of refined products is a lot smaller than the global trade of crude oil. So even a small reduction on supply could have a much larger impact.”
- Refiners are caught between not enough crude and continued demand for products, so prices must rise dramatically to kill off demand (15:37).
6. U.S. Energy Market Dynamics and Shale
- (16:24) Javier: “A US Shale producer in Texas...six weeks ago...$60 a barrel...can sell at $100 today. Everyone who can increase production a bit is going to try. But...do I see a massive amount of extra drilling coming in the US over the next three months?...No.”
- U.S. shale can help on the margin but isn't enough to offset losses of ~10% of global oil supply.
- (17:30) “Either the conflict ends soon or prices need to move much, much higher.”
7. U.S. Natural Gas Surprisingly Unaffected
- (19:28) Javier: “Nat Gas in the United States is trading almost as a six month low...the reason is U.S. shale and [that] you cannot export gas easily...liquefaction capacity is limited, so U.S. gas is trapped inside North America...”
- Result: U.S. industry and consumers are shielded, while the rest of the world suffers from energy price shocks.
8. Food and Fertilizer Fallout
- (21:49) Javier: “[The Middle East crisis] does have an impact on fertilizer prices...but fertilizer prices require time to have an impact on food production...It's a fiscal problem (for governments, e.g. India), less so a food problem right now.”
- Global wheat and rice inventories are high; food crisis unlikely unless the conflict drags on and is compounded by bad weather.
- (24:41) “If this lasts a couple of more months...my main focus is going to be how good is the monsoon [in India].”
9. Russian Oil Disruptions Add Fuel to the Fire
- (25:55) Javier: “Ukraine is hitting Russia’s oil terminals...in the far north of Russian territory...the terminals have been damaged significantly...we may be also losing potentially 1 million barrels a day of Russian oil. And it's not really the time...when you want to be losing more oil.”
10. The New Order in the Strait of Hormuz?
- Discussion of peace scenarios where Iran imposes a toll on the Strait—a dangerous global precedent, likely untenable for Middle East countries and major buyers like China (28:00).
- Notable quote: “You create a very, very bad precedent for international peace and free shipping. I will be surprised if countries in the Middle east were happy to [allow Iran a toll booth].”
11. Pricing Oil in Other Currencies: Not Happening
- (30:22) Javier: “No, I don't hear anyone [talking about moving away from the dollar]...everyone else will still want the dollar...the yuan is not there yet...they are doing it because they have no other option...just because they are on the naughty corner of the U.S. treasury.”
12. Decarbonization vs. (Re)carbonization: The Energy Transition Set Back
- The crisis is accelerating a pivot toward coal in Asia, as countries scramble to replace lost oil.
- (32:41) Javier: “We can have a simultaneous push to try to...reduce your dependence on oil...and the solution for that is going to be more generation with coal...perhaps more electrification but with more carbon intensive production of that electricity, which is not exactly what the doctor recommended.”
13. Surprises & Takeaways from Inside the Commodities World
- Power markets are remarkably calm; European natural gas and electricity have moved little compared to the 2022 crisis, thanks to new LNG supply and changed energy economies (34:30).
- (36:49) “If you look at the electricity market, it's like someone said, the world crisis [is over] because we are at normal prices here.”
Notable Quotes & Memorable Moments
- “The great thing about an oil crisis...is that we will learn about all the oil benchmarks throughout the entire world.” (Tracy Alloway, 03:57)
- “Either the conflict ends soon or prices need to move much, much higher. I am surprised that we are not much higher.” (Javier Blas, 17:30)
- “No matter how much you are paying for a barrel of oil, you may not find a buyer...But that will be in a really extreme, extreme situation.” (Javier, 09:00)
- “The refined product is where really we are seeing the real tension.” (Javier, 13:03)
- “We are going to see a movement for more solar alongside batteries...but in the immediate future, more coal.” (Javier, 32:41)
- “Electricity is just basically relaxing and having a very Spanish siesta.” (Javier, 36:49)
Important Timestamps
- 04:33 – Javier Blas on why oil prices haven’t reached panic levels
- 06:00–08:42 – How the geography of oil flows impacts the timeline of the crisis
- 12:25 – Singapore jet fuel at $200/bbl: refined products lead the crisis
- 17:30 – How much oil is the world losing? Why US shale isn't enough
- 19:28 – Why US natural gas prices are insulated from the global shock
- 21:49 – Food and fertilizer effects: why it’s not (yet) a food crisis
- 25:55 – Attacks on Russian oil terminals
- 28:00 – Javier on the risk of setting a “toll booth” precedent in Hormuz
- 32:41 – Electrification without decarbonization: more electric cars, more coal-fired electricity
- 34:30 – Surprising resilience of European electricity and gas markets
Episode Takeaways
- The current crisis is severe but not yet fully realized in oil prices due to strategic buffers and geography.
- Refined product prices in Asia have spiked to record levels, showcasing where true pain is hitting consumers and economies.
- Global oil market structure, logistics delays, and the division east/west of Suez are key to understanding the delayed impacts.
- The crisis is accelerating a shift back toward coal in Asia—hurting climate ambitions.
- Despite severe shocks, US energy markets (oil via shale, gas via export limits) are insulated, while much of Asia bears the immediate burden.
- The situation remains volatile: if the conflict continues, prices could surge much higher, and food/fertilizer impacts may yet ripple out.
- The world is facing a reality where energy security, rather than decarbonization, may dominate policy and markets for the foreseeable future.
[End of summary]