Why another Fed hike won't conjure 10 mb/d of idled oil

The Federal Reserve is pulling the only lever it has against an inflation problem that no longer sits where that lever works. The September 16 hike to a 3.75%-4.00% target, its first since 2023, and the 16 of 18 policymakers who project at least one more increase this year are aimed at a price impulse whose cause has migrated to the supply side of the ledger: more than 10 mb/d of Gulf oil output is shut in, the IEA sees 2026 world supply down 5.7 mb/d, and US diesel has traded above $200/bbl. Rate hikes brake demand. They do not relight a refinery or reopen a strait. That gap between the tool and the problem is the uncomfortable geometry of this cycle, and it is why the Fed's credibility ris…