We are being sold an energy crisis that, in physical terms, has barely materialized, but it is already fully embedded in market prices. All eyes are on the Strait of Hormuz, through which roughly 20% of global oil trade flows, and headlines scream of an impending bottleneck. But a critical fact is systematically ignored: since the early 1980s, Saudi Arabia has operated the East–West pipeline, managed by Saudi Aramco, stretching 1,200 km from Abqaiq to Yanbu, capable of transporting 5–7 million barrels per day directly to the Red Sea, entirely bypassing Hormuz.
The point is that Oil is not priced locally - it is priced at the global margin. That marginal price is shaped far more by expectations of disruption than by actual shortages. Analytical models, including the work of Ziad Daoud, reveal that roughly one-third of today’s oil price is geopolitical risk premium. In other words, you are paying today for events that may or may not happen tomorrow. Markets discount forward risk, political authorities monetize it, and consumers (households, businesses, economies) bear the cost.
The asymmetry becomes clearer when you examine regional dependencies. Europe imports only about 3% of its oil through Hormuz, but it is fully exposed to global pricing, which reacts to Asian demand, shipping insurance, and geopolitical speculation. Meanwhile, governments continue to collect fixed taxes, in Germany alone, 0.65 € per liter in mineral oil taxes, while energy companies pass on price increases immediately, but delay price reductions when the risk perception eases.
The result is not a classical supply crisis, but a price formation crisis. Infrastructure exists, production capacity exists, alternative export routes exist - trust does not. Confidence or the lack thereof has become the most expensive commodity of all. Consider Singapore’s fuel prices, which have spiked to $140 per barrel, a 146% increase year-to-date, surpassing peaks seen in both the 2008 financial crisis and the 2022 energy crunch. Fujairah, a key port just outside Hormuz, sees fuel types trading as high as $175 per barrel, while West Texas Intermediate sits at roughly $195, meaning refined fuel now carries a 40–75% premium over crude.
The pattern is predictable: it is not the physical shortage of barrels that drives prices - it is the control over the perception of scarcity. Markets, media, and policymakers collectively manufacture a narrative of crisis, which is then monetized through prices, taxes, and premiums.