Billy Bob Thorton’s character in ‘Landman’, “You want oil to live about 60 but below 90 (dollars)”

Americans are dealing with the highest gasoline prices in four years, the average gallon of regular across the nation is over $4. This has been a result of traffic through the Hormuz Strait, the narrow waterway where 20% of the world’s crude travels through, coming to a standstill in the wake of the Israeli and U.S. bombing of Iran.

While it may seem like oil companies, especially those in the U.S., would be overjoyed by higher oil prices and the windfall coming their way, it may be a curse in disguise. As a clip from episode 10 of season 1 of Taylor Sheridan’s ‘Landman’ has been making the rounds on the internet since the price of oil spiked.

The price of oil has a sweet spot

Billy Bob Thorton’s character, oil fixer Tommy Norris, gives an explanation about the pricing sweet spot for crude. “You want oil to live above 60 but below 90 [dollars],” he says.

Norris notes that the sweet spot is Seventy-eight dollars a barrel. “That’s about perfect,” he adds. “It brings enough profit to keep exploring but doesn’t sting as much at the pump.”

“Don’t get me wrong, we’re still printing money at 90, but when gas gets up over three-fifty a gallon, it starts to pinch,” Norris says. “If it’s 100, every product in America has to readjust its price.”

That means inflation rippling throughout the economy. The price of WTI and Brent crude already crossed the 100-dollar-mark briefly, WTI going as high as $119, but has since fallen back into the low $90 range. Brent, the global benchmark, is over $4 more per barrel.

Analysts are already warning though that an extended closure of the strait could see the price of oil remain high, even going back well above the $100 level. This is depressing the global economic outlook with experts cautioning of “a major risk for recession” if crude prices remain high.

Some have said $120 would trigger a global downturn. That would be bad for everyone, as people put out of work would cause a drop in demand for among other things oil.

A curse in disguise

While some are benefiting from the higher price of oil, not all in the industry are cashing in on the windfall, nor will be able to. In order to protect against volatility in the market, NPR reports that some companies had locked in lower prices before the war began.

Others have hedged their bets by investing in production in the Middle East. Much of that is trapped behind the Strait of Hormuz. Even producers in the United States that can get their oil out of ports, cannot necessarily get new production to the coast as pipelines are already full, among other challenges they have to deal with.

“This amount of volatility that we’re seeing in the marketplace is not good for anyone,” Dustin Meyer spokesperson for the American Petroleum Institute trade group told NPR. “Our industry is fundamentally predicated on making long-term investments, and it’s very hard to do that when market prices are so volatile and so unstable.”

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