The factoid thrown around is that roughly 20% of the world’s oil supply travels through the Strait of Hormuz. Since it closed, my local gas prices in one area of the US midwest have gone from $2.60 to now $4.10 presumably as reserves have been used up.
I could understand a 20~30% increase in price to correlate with the reduction in supply, but what are the economic factors that lead to what feels like such a disproportionate increase?
If the global demand is 100x and the global supply is 100x all needs are covered. If the global supply drops to 80x then the needs are not covered, and people scramble to get what they need at any expense. As prices rise more and more people look for ways they can avoid the product until a new equilibrium is reached–this percent increase cost is not correlated with the percent decrease supply.