How Tariffs Could Shock America’s Power System
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Showing 48 database articles primarily about Energy
U.S. Economy Less Vulnerable To Geopolitical Oil Price Shocks Than In The Past
Lutz Kilian, Michael Plante and Alexander Richter Federal Reserve Bank of Dallas- Date Posted:
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Kilian, et al find that the impact of an energy shock on US real GDP growth has fallen to 1/20th of what it would have been in 1980, due both to the declining share of oil in GDP and the US transition from net importer to net exporter.
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Global Market Views: Shortages
AI Summary. Reduced geopolitical risk has compressed risk premia across assets, lifting equities, commodity currencies, and emerging markets, while supply shortages in commodities and AI infrastructure sustain capital flows and keep volatility elevated even as prices rise.
Dominic Wilson and Kamakshya Trivedi Goldman Sachs- Date Posted:
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Goldman estimates the market is now pricing US growth at 2.5%, past their own 2027 forecast of 2.2%. After the Iran-ceasefire relief rally, AI-related equities are quietly taking credit for substantial macro benefits that haven’t been delivered yet.
Does reduced geopolitical risk mask persistent supply constraints in commodities and technology?
Core argument: Shortage-driven volatility dynamics result in simultaneous equity price increases and rising market volatility, creating asymmetric upside amid fundamental uncertainty.
The Iran ceasefire and the reduction in deep downside tails have allowed the market to look ahead and compress risk premia across a range of assets. That type of narrowing in the distribution is often associated with sharp market gains in situations of fundamental uncertainty, and this has proved to be the case again. Despite oil prices and yields staying elevated, a broad range of assets—including US equities, high carry/commodity FX, and EM—have recovered smartly, and renewed AI optimism has pushed those exposures to new cycle highs. The common element is that shortages—in commodities and the AI supply chain—are driving capital flows. Those tensions mean that even if we avoid the worst tails, we are likely to see volatility rise alongside further equity price increases.Takeaways by Macro Roundup® AI
- Shortage-driven volatility dynamics result in simultaneous equity price increases and rising market volatility, creating asymmetric upside amid fundamental uncertainty.
- Global Market Views: Shortages.
- The Iran ceasefire and the reduction in deep downside tails have allowed the market to look ahead and compress risk.
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- Shattered Assumptions And The Energy Quandary — Prior to the war, investors had largely stopped hedging energy-driven inflation. Gave argues that now “the true hedge to equity positions is no longer fixed…
- Gold Heads for Longest-Ever Losing Streak on Iran War Turmoil — Gold has fallen ~15% since the start of the Iran War but remains positive for the year, having returned to its January level. The decline is being attributed…
- Global Economics Comment: Global Economic Impacts of the War in Iran — GS infers from the 14% rise in oil prices to $80 since late February that the Strait of Hormuz will be closed for 5–6 more weeks, with a .02pp rise in prices…
This Time is Different (from 2022) — The Impact of Higher Energy Prices on European Manufacturing Industries
AI Summary. A new European energy price shock is projected to reduce industrial production by 2% by end-2027, half the 4% hit from the 2022/23 gas crisis, because this shock is oil-driven and globally distributed, reducing the competitive disadvantage European energy-intensive industries previously faced relative to Asia.
Niklas Garnadt Goldman Sachs- Date Posted:
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Per GS, the current energy shock will lower Europe’s industrial production by ~2%, ½ the ~4% decline that occurred during the 2022 shock. As the current shock is global, also hitting Asia, Europe does not face the competitive disadvantage it did in 2022.
Core argument: European industrial production faces a 2% hit by end-2027 from oil price shocks, half the 4% impact from 2022–23 Russian.
[We] project that higher oil and gas prices [will] lower Euro Area industrial production by almost 2% by end-2027 relative to our pre-conflict baseline, with negative IP growth later this year but a return to positive growth in 2027. This compares to an estimated drag of 4% during the energy crisis of 2022/23. The current price shock is expected to be smaller and less persistent, while the decoupling from Russian pipeline gas that began in 2022/23 has been sustained. The 2022/23 crisis was fundamentally driven by a sharp reduction in Russian pipeline gas supply to Europe and impacted a narrow set of highly gas-intensive industries particularly hard. The current shock is primarily an oil supply one that tends to reduce industrial production more broadly. However, in 2022/23, energy market shifts were largely focused on Europe, leading to major cost disadvantages for energy-intensive industries, particularly relative to China, and a surge in import competition. This time, energy price pressures are more global, with Asia appearing to be affected to a similar (or even greater) extent. European energy-intensive industries therefore look less exposed to competitiveness pressures.Takeaways by Macro Roundup® AI
- European industrial production faces a 2% hit by end-2027 from oil price shocks, half the 4% impact from 2022–23 Russian.
- Oil-driven shocks impact capital goods and export sectors broadly, whereas 2022–23 gas crisis concentrated damage on gas-intensive industries, shifting vulnerability.
- Global energy price pressures on Asia limit European competitiveness losses versus 2022–23, when regional energy cost disparities drove import substitution.
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- Salem’s Lot: Gulf War Update; The Purge Of Senior US Military Officers; A US Fossil Fuel Reliance Fever Dream — The United States is not insulated from global oil price shocks, as domestic prices for crude oil, gasoline, and other refined fuels have risen as much as or more than prices in Europe and Asia when major shipping routes are disrupted.
- Europe is Pricing Itself Out of Existence — .@MacrostrategyP argues that the EU has “traded growth for ideology” with “renewable electricity price 5x that of conventional electricity.” In March 2024…
The Hormuz Blockade Is as Much About China as Iran
AI Summary. A blockade cutting Iranian oil revenue from $175m to ~$10m per day has historical precedent but has not produced negotiating concessions, as Iran previously sustained similar revenue losses without changing its position.
Javier Blas Bloomberg- Date Posted:
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Before the war, Iran was earning ~$100mm a day from oil exports, which rose to ~$175mm during the war, before the blockade. The US “maximum pressure” campaign of 2018–2021 had reduced Iran’s oil revenue to ~$10mm a day without changing Tehran’s behavior.
How does the Hormuz blockade impact China's role in the region?
Core argument: Iranian crude revenue surged 75% to $175m daily since Feb. 27, yet prior sanctions reducing exports to 250,000 barrels daily.
According to my back-of-the-envelope calculations, Iran was making about $100 million a day selling its crude before the war. Since Feb. 27, that’s risen to around $175 million a day. If the US enforces the blockade, the Iranian economy will suffer an enormous blow on top of the war destruction. But whether that economic hit translates into a softer negotiation approach remains to be seen. Targeting Iranian oil revenue has been tried before — and it failed. In 2020-2021, when Trump launched a maximum pressure campaign of sanctions, Iranian crude exports dropped to fewer than 250,000 daily barrels for several months just as oil prices were depressed due to the impact of the pandemic. Even allowing for some exports slipping under the radar, Iran was earning no more than $10 million a day selling crude — and it still didn’t buckle.Takeaways by Macro Roundup® AI
- Iranian crude revenue surged 75% to $175m daily since Feb. 27, yet prior sanctions reducing exports to 250,000 barrels daily.
- A Hormuz blockade targeting Iranian oil drives economic pressure, but 2020–2021 maximum sanctions demonstrated sanctions alone don’t guarantee policy concessions.
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- Are We Running Out Of Oil — Disruption to a critical oil shipping route is creating severe shortages of petrochemical raw materials in Asia, with supplies of naphtha and liquefied petroleum gas already at critically low levels across multiple countries.
- Salem’s Lot: Gulf War Update; The Purge Of Senior US Military Officers; A US Fossil Fuel Reliance Fever Dream — The United States is not insulated from global oil price shocks, as domestic prices for crude oil, gasoline, and other refined fuels have risen as much as or more than prices in Europe and Asia when major shipping routes are disrupted.
- Shattered Assumptions And The Energy Quandary — Prior to the war, investors had largely stopped hedging energy-driven inflation. Gave argues that now “the true hedge to equity positions is no longer fixed…
U.S. Crude Oil Production Rose In 2025, Setting New Record
AI Summary. U.S. crude oil production reached a record 13.6 million barrels per day in 2025, driven by efficiency improvements despite reduced rig activity and lower oil prices.
Naser Ameen Energy Information Administration- Date Posted:
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American crude production expanded 3% in 2025 to a new record of 13.6mm bpd. The rig count fell 5% in the lower 48 states as productivity improved.
Core argument: U.S. crude oil production reached a record 13.6 million barrels per day in 2025, growing by 3%.
U.S. crude oil production grew by 3%, or 350,000 barrels per day (b/d), in 2025, setting a new annual production record of 13.6 million b/d. Production from the Lower 48 states excluding the Gulf of America (L48) accounted for 11.3 million b/d, or 83% of the total U.S. crude oil production in 2025. The rest of the production came from Federal Gulf of America (GOA) and Alaska. In 2025, the number of active rigs per month in L48 was 5% less than in 2024 and 1% fewer wells were drilled. Despite less rig activity and fewer wells, efficiency improvements that we saw in 2024 continued through 2025 and resulted in a slight increase in crude oil production, with new wells producing 2.9 million b/d of crude oil and wells drilled prior to 2025 producing 8.3 million b/d. Rig and well activity fell in 2025 compared with 2024 because West Texas Intermediate (WTI) crude oil prices fell from $77/barrel (b) in 2024 to $65/b in 2025.Takeaways by Macro Roundup® AI
- U.S. crude oil production reached a record 13.6 million barrels per day in 2025, growing by 3%.
- Production from the Lower 48 states accounted for 83% of total U.S. crude oil output in 2025.
- Despite fewer active rigs and wells, efficiency improvements led to increased production levels.
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Fighting Words: The Energy Transition in 2026
Michael Cembalest J.P. Morgan- Date Posted:
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As measured by useful final energy consumption in 2024, nuclear provided 6% of America’s 44.5 exajoules, renewables 9%, and fossil fuels 85%. The corresponding numbers for China’s 87.7 exajoules were nuclear 2%, renewables 13%, and fossil fuels 85%. Coal was 54% of China’s consumption and oil 18%, relative to 8% and 30%, respectively for the US.
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- Electricity 2026 — Since 2024, global electricity demand has outpaced GDP, which it had previously tracked – a “trend shift” in the relation between the two. IEA forecasts…
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