According to Ethan Currie of the National Bank of Canada (NBC), oil prices remain elevated due to ongoing supply shocks, particularly from persistent disruptions in the Middle East, depleted reserves, and shortages of refined products such as gasoline and diesel [1]. Currie notes that while there was a brief improvement in July with some recovery in visible traffic through the Strait of Hormuz, transit volumes have since declined and remain significantly below pre-war levels—by as much as half [1]. Attempts to reroute shipments have not fully compensated for these losses, and attacks on Saudi tankers and infrastructure have further highlighted the fragility of current supply channels [1].
The report emphasizes that the most significant impact has come from shortfalls in refined products, which have driven crack spreads to record highs and resulted in record prices at the pump [1]. Global supplies of gasoline and diesel from the Middle East and Russia remain restricted, and other refining centers, such as the U.S., are operating at full capacity and cannot add meaningful supply, while some regions face crude availability issues [1]. The situation could worsen during upcoming refinery turnaround seasons, which may further reduce supply when it is most needed, potentially leading to additional price increases [1].
Currie argues that there is no easy solution to these shortfalls. Even if supply were restored, it could take years for inventories to return to normal levels, suggesting that higher oil prices may persist for an extended period [1]. Despite some moderation from peak spot oil prices, the pressure on policymakers to respond is increasing as the forward curve remains elevated, indicating expectations of prolonged price pressures [1].
CONCLUSION
Persistent supply disruptions and refined product shortages are keeping oil prices elevated, with no quick resolution in sight. According to NBC, even if supply conditions improve, it could take years for inventories to normalize, suggesting a higher-for-longer pricing environment and ongoing pressure on policymakers.