Key Takeaways

Markets are watching tankers while missing collapsed production. Berman's central point is that attention is fixed on transportation through Hormuz, but the deeper shock is upstream: by his estimate roughly "10 million barrels of oil per day is shut in," a bigger supply shock than COVID.

The Hormuz crisis is getting worse, not better. He says only a handful of commercial vessels are transiting the strait versus 130 to 140 before the war, and he would be "pleasantly surprised" if flows recovered to half of pre-war levels by mid-2027.

A peace deal will not flip a switch. Berman argues restarting is not that simple, because "There's no switch here": shut-in wells can be damaged, and even in the best case only around 80% to 90% of production comes back, over weeks, with some possibly gone for good.

He thinks the post-WWII order is unraveling. In his framing, "The grand bargain is dead": the arrangement in which the US guaranteed maritime trade in exchange for the dollar's reserve status is breaking down as the US struggles to secure a critical choke point.

Markets are pricing risk, not getting it wrong. Berman resists the idea that markets misread the shock, arguing they react fast and price tail risk, and that the futures curve's shift into steep backwardation is a clear scarcity signal.

Key Moments

00:54 - Strait of Hormuz crisis: why conditions are getting worse Vessel traffic collapsed, and why Berman doesn't expect a quick recovery.

03:57 - Oil markets, Iran and the risk investors are pricing Why he says markets are adapting and pricing risk, not misreading it.

10:05 - Why demand destruction becomes the ultimate solution How an out-of-balance market ultimately clears.

13:18 - 10 million barrels a day of oil production shut in The upstream collapse Berman says no one is discussing.

16:24 - Oil stocks vs. flows: what investors are missing Why the production base matters more than tanker traffic.

22:09 - Hormuz, the Panama Canal and the new geopolitics of choke points Flows as economic and political weapons.

27:18 - Why a Middle East deal won't quickly restore oil flows The real logistics behind "just make a deal."

38:16 - The post-WWII energy order is unraveling Why Berman says the grand bargain is dead.

Why Are Oil Prices Rising? Art Berman on the Broken Global Energy Order

Oil prices rise when the market fears that supply cannot meet demand, and energy expert Art Berman, a geologist and industry consultant, told Wealthion in August 2026 that the fear is well founded, just not for the reason most headlines give. While the news watches tankers squeeze through the Strait of Hormuz, Berman argues the real story is a collapse in production underneath, and a global energy order that he believes is breaking down for good. This follows his earlier warning that Hormuz is gone.

Is the Hormuz crisis getting better or worse?

Worse, on Berman's read. He says that on a recent day only about six commercial vessels moved through the Strait of Hormuz, against 130 to 140 before the war, effectively near zero. The repeated ceasefire talk has not held, and his most likely case is that little changes through year-end. Looking further out, he says he would be "pleasantly surprised if Hormuz flows return to 50% of pre-war by the middle of 2027," because the obstacle is not only whether leaders reconcile, but a logistical problem that runs deeper than politics.

Are markets getting the oil story wrong?

Berman pushes back on that popular narrative. He argues markets are very good at optimizing for near-term profit and react quickly when conditions change, pointing out that the futures curve shifted from relatively flat to steep backwardation, high near-term prices, lower prices further out, in about two weeks, which he calls a clear signal of scarcity. Markets understand tail risk, he says, but discount it precisely because it is the tail. His conclusion, delivered with characteristic care ("certitude and ignorance are pretty close together"), is that the market "was pricing risk," not getting it wrong.

What is everyone missing about oil supply?

The production collapse, which he frames through stocks versus flows. Berman explains that analysts and the news focus on the midstream (transportation, the tankers and pipeline workarounds) and the downstream (refining), while ignoring the upstream: production. And Persian Gulf production, he says, is down about 10 million barrels a day, having been down 15 million at the low. For scale, he notes COVID cut roughly 11 million barrels a day when the entire global economy shut down, so "it certainly is a bigger system shock than COVID." Flows, in his metaphor, float on top of stocks, and the shut-in production base is the deeper problem: "10 million barrels of oil per day is shut in." The demand side of the energy story is explored in why AI's dirty secret is oil.

Why won't a Middle East deal quickly restore oil flows?

Because, Berman argues, the constraints are physical and human, not just diplomatic. Hormuz is the "takeaway constraint": as long as it is blocked, production has nowhere to go, so it cannot increase. Even with a deal, the tankers and cargoes are worth hundreds of millions of dollars and are run by people, owners, insurers and crews, who must be comfortable with the risk. The strait is mined, and Iran's government is not fully unified, so rogue elements could still fire on a vessel. As he puts it, would anyone who spent six months stuck on a tanker in the Gulf sign up to go back? Adaptation, he stresses, is not a solution; the market's ultimate release valve is demand reduction, whether through higher prices or simple logistical limits. Anthony Scaramucci has similarly warned investors not to ignore the next oil shock.

Could shut-in oil production fail to come back?

Yes, and this is one of Berman's most important points. In theory you turn a valve and the oil flows again, but "it never works that way." His analogy: when a plumber shuts off your water and turns it back on, the faucet spits and runs brown before clearing, and that is a clean, short pipe. An oil well is far wider, runs 10,000 to 12,000 feet down, and connects to rock whose tiny pores can clog when a well is shut. Restarting can mean spitting and shaking for days, weeks, or longer. He estimates roughly 80% to 90% of shut-in production comes back within days or weeks, but some may never return, and "you don't know" in advance. His bottom line is that "There's no switch here."

Are choke points the new geopolitical weapon?

Berman sees a broader shift: critical flows have become economic and political weapons, putting every choke point "up for grabs." He points to attention on the Panama Canal and Greenland as other choke points and flow pathways, and argues US energy strategy documents were focused on choke points even before the Iran conflict, suggesting the move on Iran was partly about asserting control over one. He is careful to frame this analytically rather than politically, noting he has been critical of multiple administrations, and cautions against assuming there was no plan, while also calling the specific gamble a high-risk one.

Is the post-WWII energy order breaking?

This is Berman's largest claim: "The grand bargain is dead." He describes the post-1945 arrangement, in which the US guaranteed maritime trade in exchange for the dollar serving as the world's reserve currency, and argues it is unraveling because the US can no longer guarantee free trade, with its ability to project power in the Middle East eroding slowly. He traces the history from Franklin Roosevelt's 1945 meeting with the Saudi king, when the US produced most of the world's oil, through the way the 2003 Iraq invasion upset the regional balance and, in his telling, allowed Iran to rise, "and that bell's still ringing." For a complementary view, see Wealthion's coverage of the new energy order.

Where are oil prices headed?

Berman leans toward a prolonged "system shock" rather than a quick round trip. Unlike COVID, which had a switch (a vaccine and reopening), this crisis has none, and he says plainly, "I don't think we're ever going back to January 2026 for energy." He expects upward pressure on crude until other sources pick up the slack, and difficulty for an economy whose "metabolism" is energy. On price behavior, he defends the market's swings as price discovery: during the Iran war it took four months for oil to move from a roughly $30 premium back to zero, and the peak stayed near $100 to $102, below the $110 to $120 of the Ukraine war, not because the market was wrong but because commercial inventories are far less depleted now. In his words, the market "was pricing risk." As always on Wealthion, this is Berman's attributed analysis, not investment advice.

FAQ

Why are oil prices rising? Art Berman argues prices reflect a genuine supply shock that markets are pricing as risk. The visible story is disrupted tanker traffic through Hormuz, but the deeper driver, he says, is a collapse in Persian Gulf production, roughly 10 million barrels a day shut in, which he calls a bigger shock than COVID.

Is the Strait of Hormuz crisis getting better? No, in Berman's view it is getting worse. He says only about six commercial vessels are transiting daily versus 130 to 140 before the war, and he doubts flows will return even to half of pre-war levels before mid-2027.

Why won't a Middle East deal quickly bring oil prices down? Because restarting is not a switch. Berman argues shut-in wells can be damaged, tanker owners and crews must accept real risk on a mined strait, and only about 80% to 90% of shut-in production is likely to return, over weeks, with some possibly gone for good.

Could oil production fail to recover? Potentially. Berman explains that shutting in a well can clog the rock it draws from, so restarting can take days or weeks and, for some wells, may never fully succeed. "There's no switch here," he says.

Where are oil prices headed? Berman expects a prolonged system shock with upward pressure on crude, saying he does not think energy markets return to their January 2026 state. He frames oil's sharp swings as normal price discovery around an underlying level set by inventories.

Which expert and interview does this article reference? This article draws on Wealthion's interview with Art Berman, geologist and energy consultant: "The Global Energy Order Is Breaking."

Full Transcript (cleaned)

Speakers: Maggie Lake (Wealthion host) and Art Berman (geologist and energy consultant). ASR errors corrected and filler removed; meaning preserved. A couple of loaded political descriptors have been softened, keeping the substantive analysis intact.

Art Berman (cold open): 10 million barrels of oil per day is shut in. That was oil that used to be produced, and now it's not. There's no switch here. I don't think we're ever going back to January 2026 for energy. The grand bargain is dead.

Maggie Lake: Hello and welcome to Wealthion. I'm Maggie Lake. Joining me today to discuss the outlook for energy is Art Berman, geologist and energy industry consultant. Hi Art, welcome back.

Art Berman: Thanks for having me again, Maggie.

Maggie Lake: When we spoke in June, you were very concerned about the Strait of Hormuz. What's your view now?

Art Berman: Nothing has really changed, which in some ways isn't surprising, but it's not a satisfying answer. In June we were on the verge of some kind of temporary agreement between Iran, the United States and Israel, and it lasted about as long as I thought it would, then fell apart. So we're back to roughly where we were before. Despite all the talk of a solution around the corner, the reality on the ground is that I think about six commercial vessels moved through Hormuz yesterday, compared with 130 to 140 before the war. That's pretty much zero. So the situation is worse, or at least as bad.

Maggie Lake: Do you see a scenario where oil flows through the strait at pre-war levels?

Art Berman: No one knows, and I've been around long enough to know that certitude and ignorance are pretty close together. My most likely case is that basically nothing changes between now and the end of the year, with weeks that look a little better or worse. Longer term, I'd be pleasantly surprised if Hormuz flows return to 50% of pre-war by the middle of 2027. And it doesn't all come down to the hostilities; it's a logistical problem that transcends whether everyone can make nice.

Maggie Lake: Markets seem to be pinning hope on a ceasefire that holds. What other factors are you watching?

Art Berman: I'm not someone who thinks markets always get everything right, but what markets get incredibly right is optimizing for profit in the near term. When people say markets expect a peace agreement, what I see is that markets are encouraged by how adaptable the energy system has been. We talk about markets as if they're people, and they kind of are us. The system has adapted remarkably well considering what's happened. Markets discount the future and note that six months in, the world hasn't had a heart attack, which is true, though some parts of the world are having palpitations. Markets understand tail risk, but it's the tail, so it's strongly discounted, and they react very quickly when conditions change. Over the last few weeks the futures curve went from relatively flat to a very steep discount out six to twelve months with high near-term prices, which is a signal of scarcity. So markets aren't complacent, and I react a bit when people say markets have gotten this wrong.

Maggie Lake: Is the flexibility we've seen a permanent feature, or are the temporary measures, SPR releases, pipeline workarounds, being exhausted?

Art Berman: That's exactly the right question, and as an earth scientist my inclination is always to say it depends, because these factors are interrelated, overlapping and nonlinear. Analysts are smart, but they have to reduce the message so investors or the public can grasp it quickly, and we end up with "oil rises as Trump threatens attacks." Some of that is sort of true, but no experienced person takes those threats as seriously as six months ago, because we know the history. As for whether the market's adaptations are reaching exhaustion, the answer is that they never do, because the default is demand reduction. That's ultimately how the market clears: if supply and demand are out of balance, the market clears either by raising prices so some buyers are left out, or through logistical limits that mean you can't get the supply regardless of price, which also reduces demand. The key distinction is that analysts and news focus on the midstream, transportation. Tankers aren't getting through Hormuz, so oil goes another way, through a pipeline across Saudi Arabia to the Red Sea, or around the back side of the United Arab Emirates. Those are midstream workarounds. Some point to the downstream, Ukraine attacking Russian refineries, the Houthis attacking Saudi refineries, and those matter. But what about the upstream, production? When do we ever hear about what's happened to Persian Gulf production? It's down 10 million barrels a day. That's massive. It's up a little from its low, but at the low it was down 15 million. Rewind to COVID, when the entire global economy closed and production fell about 11 million barrels a day. So this is a bigger system shock than COVID, and yet you don't hear it discussed.

Maggie Lake: So what's the situation with the stocks, since no one's focusing there?

Art Berman: Let me add two terms: flows and stocks. Transportation is a flow. The SPR is a stock; the fields that produce the oil are a stock. Flows matter, but they float on top of a stock, and the stock doesn't have to fall any further than it already has to generate all kinds of downstream perturbations. Hormuz is the takeaway constraint: as long as it's constrained, production has nowhere to go, so it can't increase. About six million barrels a day are getting out through pipelines. If the Houthis constrain the Red Sea too, that's another takeaway constraint. Saudi Arabia moving oil through the Suez Canal is another workaround, but it adds cost and puts the oil in the Atlantic basin, good for Europe and the US, not Asia. The bottom line your viewers need is that adaptation is not a solution. Ultimately you either make the constraint go away, which doesn't mean you return to where you were, or you cut demand.

Maggie Lake: For years our expectation of oil prices was set by the stock, watching OPEC. This episode suggests flows matter too, at least short term. Is that a new risk factor?

Art Berman: That's fair. Those of us in the industry always think about both, because they're related, but for the public it's a new awareness. People have learned geography they never had to think about, like what Hormuz is. And in political terms a flow becomes a choke point, a kind of economic weapon, which raises the question of whether every critical flow point is now up for grabs. This is a progression. Not long ago there was noise about the Panama Canal, a choke point, and about Greenland, another critical pathway. If you read the White House energy strategy statements, they're all about choke points, even before the Iran war. I'd argue the US move on Iran was partly about asserting authority over that choke point, which puts it in a different light than assuming they wandered in without a plan. I can be critical of this administration, as I was of the previous ones, on energy or geopolitics. But however one views its style, the US government isn't naive; there's real expertise advising it. So it's naive to think there was no plan. I do think it was a bad plan, high risk, the idea that the US could quickly make Iran capitulate. But having opened that door, you can't close it, and what you do next isn't necessarily dumb; it's what you do when you've opened the wrong door.

Maggie Lake: What do we need to understand about production, and what does it mean for prices?

Art Berman: Even if everyone suddenly reconciles and signs another memorandum of understanding, Hormuz doesn't normalize quickly, because it's not just leaders laying down their differences. There are real economic interests: tankers and cargoes worth hundreds of millions of dollars, run, insured and crewed by living people who have to be comfortable with the risk, and they're not. The strait is mined, and the Iranian government isn't fully unified; elements of the Revolutionary Guard might fire on a tanker the government didn't authorize. If you or I had been stuck on a tanker in the Persian Gulf for six months, would we sign up to go back? So it's not "make a deal and everything's normal." In some ways nothing goes back to normal.

Art Berman: On restarting: 10 million barrels a day is shut in. In the best case you turn a valve and the oil flows as before, except it never works that way, and as a producer the last thing I want to do is shut off a well. When a plumber shuts off your water and turns it back on, the faucet spits and belches and runs brown for a bit; that's a clean quarter-inch pipe running maybe 50 feet. An oil well is about four and a half inches wide, goes down 10,000 to 12,000 feet, and connects to rock with tiny holes that can get blocked when you shut it in. Turn it back on and it may spit and shake for a week, a month, a day, or it may never fully come back. Probably 80% to 90% returns within days or weeks. Some may not, and you never know in advance.

Maggie Lake: Are we higher for longer on oil, or could prices come down as people see through the short-term issues?

Art Berman: I'm leaning toward system shock. COVID was a shock, but the fix was a vaccine or relaxing the rules; there was a switch. There's no switch here, and COVID was a demand issue, people couldn't buy things because the economy was closed. We're still reverberating from COVID, just as we're still reverberating from the financial crisis. I'm a geologist; when there's a big earthquake the earth rings and vibrates for decades. The economy rings too. It's path dependent; it never goes back to where it was, it adjusts. This will adjust, but not easily, and not by flicking a switch. At the risk of sounding too certain, I don't think we're ever going back to January 2026 for energy. I truly hope I'm wrong. System shock like never before, for a civilization whose metabolism is energy, mostly oil. It's like the worst crash diet imaginable, cutting your intake 10% overnight; you'd better have a doctor advising you.

Art Berman: Let me paint another picture. The world economic order has been unraveling for a while. After World War II the grand bargain was that the United States would guarantee maritime trade, more or less, in exchange for the dollar as the world's reserve currency. That's simplified, but that's the outline, and the grand bargain is dead, and everybody knows it. The US can't guarantee free trade, which is why Hormuz is so important, oil, sure, but if the US can't fix this, the whole deal unravels slowly, and the US ability to project power in the Middle East is done, not overnight. My first degree was in Middle Eastern history. Franklin Roosevelt understood oil; on his way back from Yalta, where he, Stalin and Churchill redrew the map, he stopped in the Red Sea and met the king of Saudi Arabia, and made another grand bargain: you guarantee oil to the United States, and we'll guarantee your sovereignty. At the time the US produced something like 55% to 60% of all the oil in the world, and part of why Japan attacked Pearl Harbor was that we stopped selling it oil. The cornerstone of US foreign policy since 1945 has been Middle Eastern oil security. The 2003 invasion of Iraq upset the balance of power, removing Saddam Hussein, the natural counterweight to Iran, and that bell is still ringing; that's why Iran grew powerful. There's a much bigger story here that doesn't get discussed, and I promise you the administration's senior advisers understand it well.

Maggie Lake: Is this level of complexity priced into oil, into any market?

Art Berman: It's in the tail, always in the tail. When oil moves $8 in a day, that's price discovery. Something structural changes, and the market works it out: you think oil is going to $70 because of a deal, I think you're wrong and take the other side, and the price responds over the short term until reality sinks in and it moves toward an attractor, to borrow from complexity science. Those high-frequency swings are how the market figures it out; it didn't suddenly go bipolar, though some traders might have. During the Iran war it took four months for oil to go from about a $30 premium back to zero. Was the market wrong? No, the market was pricing risk. People ask why the peak never exceeded around $100 to $102, when in the Ukraine war it hit $110 to $120. The answer is inventories: we're still nowhere near the inventory deficit we saw during the Ukraine war, across all commercial stocks, not just the SPR. So the risk premium relative to the attractor was actually higher in the Iran war; the absolute price was just lower because inventories were higher. It's not random. Just because you don't understand something doesn't mean it's wrong.

Maggie Lake: A lot of pieces of information today, Art. We love these in-depth conversations. Thank you so much.

Art Berman: Thank you, Maggie. It's a pleasure.