Tag Archives: Oil

Why didn’t Europe run out of jet fuel this summer?

In the spring of 2026, the Iran War started. This immediately shut down the Strait of Hormuz and led to a critical shortage of oil in the world markets.

But crude oil itself isn’t really important to any of our lives, we don’t use it in our cars, planes, or plastics. It’s the refined oil products that really affect us. And this came to a head immediately in Europe.

Europe imports most of its oil from the middle east, and much of that oil is refined into jet fuel for aviation. With the Strait shut down and no more oil coming to Europe, it seemed obvious that a jet fuel crisis was about to ruin the continent’s summer plans.

This isn’t idle chit chat either, social media was ablaze with rumors, warnings and panics about a jet fuel crisis that would shut down Europe’s airports. Dire predictions were made that most of the major European powers would be completely out of jet fuel by now, unless the Iran war ended *immediately* back in the Spring.

But the Iran War didn’t end. But also, Europe didn’t run out of jet fuel. Planes continue to fly Europe’s skies with the same regularity as they did in 2025. Why did yet *another* dire prediction of imminent fossil fuel doom not come true? In general it’s because those loudest about fossil fuels and economics know the least about them.

First of all, Europe’s jet fuel crisis was a highly localized event. Oil had trouble leaving the Gulf nations due to the war in Hormuz, and much of this oil was destined for Europe. But the rest of the world kept ticking, kept producing and refining oil, and kept making jet fuel. The global price of oil and oil products rose moderately as supply was constricted, but it’s important to remember that most goods are elastic. As the price rose, many people chose not to use oil and switched to other forms of power, like coal plants starting back up in China and Southeast Asia.

And likewise, jet fuel doesn’t have to be made in European refineries from Persian Gulf oil. America is a net oil exporter and a refinery powerhouse. Millions of barrels of oil and oil products were exported from America to Europe as European prices rose in conjunction with the shortage.

So a jet fuel shortage doesn’t at all mean grounded planes, it just meant that Europe had to import fuel instead of making it themselves. But some online argued that imported fuel could never make up the shortfall, as tankers are too slow and supply chains too rigid to allow this fact rerouting of jet fuel. They were wrong about that, but also tankers alone are not needed.

When a plane normally flies a route, it likes to take only as much oil as it needs to get to where it is going (plus some extra in case of an emergency). So if a plane is flying New York → Paris → Berlin, it will take only the oil it needs to get from New York to Paris, then top off in Paris so it has enough to get to Berlin. This way they don’t carry extra fuel, which means extra weight, which means less fuel efficient travel.

But what if jet fuel in Paris is very expensive, as was the case during the jet fuel shortage? Then the airline will decide instead to fill the tanks *completely* in New York, that way they’ll have enough to get to Paris and Berlin without having to fill up in Europe. The added cost of less fuel efficiency is overcome by the added benefit of buying jet fuel for cheaper. This is also a direct and immediate way to “import jet fuel” to Europe, just have planes that fly America to Europe routes top off before they leave America.

And importantly, all these things happened without the hand of the government. The EU did not have to send a missive telling airlines to top off their tanks in America, the airlines did it anyway by following the logic of supply and demand. As prices rose in Europe, they sought cheaper jet fuel in America. That’s how a modern economy works, nothing is stagnant, there’s always market participants trying to mitigate the effects of a supply shock as doing so gives them an edge over their competitors.

The final element of this tale is the most controversial: more oil got pumped than expected.

First, closing off the straight of Hormuz didn’t completely cut off oil from the Persian Gulf. Oil has been rerouted overland, and convoys have continued to pass through the straight. Some won’t like to hear it, but there’s a reason oil isn’t $200 a barrel as many twitterati predicted. There’s a lot more oil getting out than Iran would like you to believe.

Secondly, a shortage of oil has caused other oil producers to ratchet up their production. Again, many twitterati believe the oil industry is nothing but mustache twirling ne’er-do-wells. They believe that the oil companies either can’t pump more oil (because there physically isn’t enough) or won’t pump more (as they love high prices). No one is willing to admit that high prices spur more supply, as greedy companies try to produce more and more oil to take advantage of those prices.

In particular, America and Argentina have had a new oil boom in response to the war in Iran. Both nations use a lot of fracking, which has a much quicker lead time than traditional oil plays, and can be scaled up and down rapidly in response to market forces. America and Argentine won’t replace the Persian Gulf completely any time soon, but a lot more oil has been produced in response to the global oil shortage than the simplistic models assumed. The shortage was thus never as severe as people made it out to be.

Commentators online need to think more in terms of second and third order effects. Cutting off oil from Hormuz doesn’t happen in a static world, you can’t just subtract that oil from the global total and assume the price per barrel will hit $200. Oil companies pumped more oil in response. Gulf nations rerouted their supplies in response. Airline companies retooled their purchasing in response. And Europe never ran out of jet fuel.

Long time, no post

Job priorities and health issues have gotten to me of late, but I want to keep my hobby alive so I’m posting again.

The Lib Dems in Britain are again proving that they are complete NIMBYs in all but name. A lot of Liberal spaces like the word “YIMBY” now, and the implications that go along with it. But suddenly once a house needs to be built in “my” backyard, Libs like the Lib Dems are demanding an array of extras get tagged on so that the price of building the new housing skyrockets and the housing doesn’t get built after all.

There’s always a Disney morality that NIMBYs tug on. It’s sad when a new things changes an old thing you grew up with. And it’s inconvenient when your own life has to change to accommodate newcomers. Wouldn’t it be great if everything could stay the same? And if your own life was never affected negatively by anyone around you?

But frankly, this morality is childish. In the real world things change, and each of us changed the world in our own way, so too must we adapt to the coming of those after us. The Lib Dems want to demand that homebuilders build new amenities with each new house, so that locals won’t have to adapt to their area having more people with the same amount of amenities. But if the demand for amenities is there, then someone else will come in and build them. If an area doesn’t have enough doctors, new GPs will open up shop, secure in the knowledge that they’ll have a bustling client base immediately.

But demanding that a homebuilder build doctors offices as well, with no guarantee that the area actually needs new doctors, is ridiculous. And even if the area does need new doctors, let the people who specialize in building those things build new doctors offices. Let the homebuilders build homes.

As I said, we all were a burden on our local amenities when we first came into this world, when we first moved to our current home. So to will those coming after us burden our area. But those who came before us dealt with our presence, we should deal with those who come after. Let people build homes, for God’s sake.

Oil has become a much more elastic good than many commentators believe it to be. To recount, usually when the price of a good goes up, that signals to suppliers to create more of it. For a good with inelastic supply, supply changes little in response to price.

During the height of OPEC’s power, a few countries could hold a cartel on the market, so that no matter how much the price rose, supply stayed relatively constant. The excess price was simply taken by the cartel as economic rents, “free money” so to speak.

But OPEC is no longer at the height of its power. Several of the OPEC nations have been ignoring the cartels demands for years now, the core nations are agreeing to end their own supply constraints, but more importantly than anything else the USA is now the number 1 producer of oil, and its free market does indeed respond to supply and demand. New wells can and have turned on as the price has risen, with more and more land continuing to be explored for more oil.

I’ve seen it written a lot recently that oil supply is simply inelastic, and that this is why demand-side subsidies like Canada pausing its gasoline tax won’t do anything at all to help with affordability. But first, this argument doesn’t follow. And second, oil really isn’t as inelastic as it used to be. More oil will indeed be pumped as wells turn back on and as oil profits incentivize well expansion.

The timeline for this increase may not happen within the short scale of current wars (the current one may already be over when this is published?), but it does happen, and it’s part of why the price for Brent Crude futures remains so low despite the threat of so much oil being barred through Hormuz. Investors know that higher price will bring on more supply to bring the price back down. And of course many are betting that the war will be over soon, but that’s another issue.

Just random streams of consciousness.