<p>In real-time nobody can know the answer, but using <a href="https://www.sciencedirect.com/science/article/abs/pii/S030439321830463X" rel="nofollow noreferrer">Dario Caldaraa, Michele Cavalloa and Matteo Iacoviello 2019</a> estimates of price elasticity of supply for oil from 1985 to 2015 which was -0.1 (this means that 1% increase in supply leads to -0.1% decrease in price and reverse is also true), the best educated guess is: 0.5%, 1.5%, and 2.5% increase.</p>
<p>However, these numbers always change from time to time, and the estimates are just average estimates. The elasticity usually changes with prices so margins of errors here are very large.</p>

CC BY-SA 4.0
2021-08-05T22:56:59.297Z
If supply of oil drops by 25%, the price will only rise 2.5%?
Maximus1987
CC BY-SA 4.0
2021-08-05T22:59:04.413Z
@Maximus1987 based on average elasticity between 1985 to 2015 yes, in reality probably no. As I told you in my answer this is impossible to answer in real time. Also, I dont think that any person here will go out of her way to spend weeks to model your unrealistic scenario to make better forecasts for internet points.
csilvia
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2021-08-06T05:40:57.960Z
@csilvia Also, can we get the change of the equilibrium price just from supply elasticity? Seems like it would provide an upper bound even in case of marginal changes.
Giskard
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2021-08-06T05:41:30.623Z
@csilvia Internet points!!!
Giskard
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2021-08-06T19:11:01.867Z
@Giskard demand elasticity is also around 0.1 in that paper
csilvia
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2021-08-05T22:55:33.457Z
2021-08-05T23:39:35.463Z
2021-08-05T23:39:35.463Z
csilvia
<p>If tomorrow the supply of oil dropped 5, 15, 25% … etc how much would the price per barrel increase?</p>
<p>I would be happy with even a rough estimate but I would like some kind of justification.</p>
<p>The scenario would be the Strait of Hormuz closing due to war.</p>

<oil>
Effect on price of sudden oil supply drop
Maximus1987
# Effect on price of sudden oil supply drop

(Asked by: username_0 on 2021-08-05)

If tomorrow the supply of oil dropped 5, 15, 25% … etc how much would the price per barrel increase?

I would be happy with even a rough estimate but I would like some kind of justification.

The scenario would be the Strait of Hormuz closing due to war.

**Tags:** oil


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## 1 answers

### Answer by username_1 on 2021-08-05. Score: 1

In real-time nobody can know the answer, but using [Dario Caldaraa, Michele Cavalloa and Matteo Iacoviello 2019](https://www.sciencedirect.com/science/article/abs/pii/S030439321830463X) estimates of price elasticity of supply for oil from 1985 to 2015 which was -0.1 (this means that 1% increase in supply leads to -0.1% decrease in price and reverse is also true), the best educated guess is: 0.5%, 1.5%, and 2.5% increase.

However, these numbers always change from time to time, and the estimates are just average estimates. The elasticity usually changes with prices so margins of errors here are very large.

> **Comments:**
> **username_0**: If supply of oil drops by 25%, the price will only rise 2.5%?  
> **username_1**: @username_0 based on average elasticity between 1985 to 2015 yes, in reality probably no. As I told you in my answer this is impossible to answer in real time. Also, I dont think that any person here will go out of her way to spend weeks to model your unrealistic scenario to make better forecasts for internet points.  
> **username_2**: @username_1 Also, can we get the change of the equilibrium price just from supply elasticity? Seems like it would provide an upper bound even in case of marginal changes.  
> **username_2**: @username_1 Internet points!!!  
> **username_1**: @username_2 demand elasticity is also around 0.1 in that paper  

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