If you’ve been watching global headlines lately, it would be easy to assume oil prices would be sky-high: a major oil-reserve country mired in crisis, sanctions on perennial producers, regional conflicts simmering, and social unrest in several exporters. And yet Brent and WTI have been languishing around $60 a barrel, a level that, a decade ago, most analysts would have dismissed as impossible in such conditions
What’s happening?
At first glance, the logic of oil pricing should be straightforward: supply risk should mean higher prices. But today’s market tells a very different story, one where geopolitical shocks don’t automatically translate into price shocks.
The Changing Nature of Supply Risk
Take Venezuela, the poster child of dysfunctional oil production. Sitting on the world’s largest proven crude reserves, you’d expect its political upheavals to roil markets. In reality, Venezuela’s output has already shrivelled over years of mismanagement, sanctions, and capital flight. What matters most to traders isn’t headline reserve totals, it’s actual barrels available to buy, ship, refine, and burn. Caracas no longer moves global supply balance sheets in any meaningful way. This is also unlikely to change with the US intervention, as companies require a stable regime to operate in. Such is a long way away in Venezuela.
Meanwhile, traditional trouble spots like Russia and Iran are constrained by sanctions more than geology. Their exports find buyers, but often at steep discounts and under complex legal and logistical workarounds. Oil markets have, over the past decades, learned to price sanctions as part of the baseline, not an extraordinary disturbance.
Demand Is the New Wild Card
What’s truly different now isn’t just supply, it’s demand behavior.
A decade ago, oil demand growth was almost a given. Emerging markets industrialized en masse; transportation fuel demand climbed inexorably; industrial energy use marched upward. Today, that certainty has fractured. Efficiency gains, electrification of vehicles, alternative fuels and regulatory pressures have altered the trajectory. Even in markets where oil demand hasn’t peaked, it’s plateauing, or at best growing slowly.
In today’s world, traders don’t simply ask: “Will supply tighten?”
They increasingly ask: “Will demand growth falter before supply truly tightens?”
That shift matters. A potential drop in consumption, driven by EV uptake, fuel efficiency, and energy transition policies, is far more price-inhibiting than any single supply disruption is price-supporting.
