He has a point.
I am not sure about USD 40 a barrel. But watching what oil has done during what may be the most extraordinary confluence of crises we have seen since the Second World War tells us something rather important about the state of the global economy.
Oil has barely pushed beyond USD 100.
That should make us think.
Apparently, the world does not need as much oil as we once assumed.
The reasons are not particularly mysterious. China’s economy is not merely struggling; according to some observers, it is already flat on its face. A substantial part of the export-oriented world is being dragged along with it. And the developed economies are hardly flourishing either.
People are struggling with inflation, affordability and the steadily rising cost of simply maintaining an ordinary life.
That matters because economies in distress do not consume much.
An export economy with a crippled industrial sector does not suddenly compensate by buying more oil. A consumer economy whose households are being squeezed by the cost of living does not consume its way out of trouble either.
Less production means less industrial demand.
Less consumption means less transport and commercial demand.
And ultimately, less demand means less oil.
This creates an interesting dynamic.
If oil supply falls but demand is simultaneously lacklustre, prices do not necessarily explode. The supply shock pushes upward. Weak demand pushes downward.
The two forces collide.
The result can look surprisingly benign.
Then there is the crisis premium.
War, disruption and fear put an additional speculative layer onto the price. Markets anticipate shortages before they actually occur. Traders price in risk. Insurance becomes more expensive. Supply routes become less certain.
That can push the price higher than underlying demand alone would justify.
But it is a short-lived aphrodisiac.
No crisis lasts forever.
Eventually the headlines fade, the supply system adapts, inventories are rebuilt and the market begins looking at the underlying fundamentals again.
USD 100 a barrel sounds high, doesn’t it?
It certainly feels high.
But feelings are not an economic measure.
The dollar of today is not the dollar of fifteen or twenty years ago. Inflation has eaten away at purchasing power while almost everything around us has become more expensive. Measured against the purchasing power of the currency and the general price level, USD 100 is not remotely as extraordinary as the headline suggests.
And that is perhaps the more interesting part of the story.
The oil price is being pushed upward by an extraordinary geopolitical environment.
Yet it struggles to stay meaningfully above USD 100.
That tells us something.
The Iran war is not the only driver of the oil price, but it is a major one. Remove the crisis premium and we are left with a much less dramatic question:
How much oil does the world actually need anymore?
That may be the number worth watching.
Because if supply can be disrupted on a historic scale while demand remains weak enough to keep prices from running away, the problem may not be that the world is running out of oil.
The problem may be that the world is running short of economic activity capable of consuming it.