An Oil Squeeze Just Weeks Away Threatening Far Higher Oil Prices
Prepare For Rapidly Escalating Fuel And Price Inflation
The impact of the war with Iran has just begun, in turn, to impact the global economy. The price of crude oil has risen above $100 /bbl however that is about to greatly change.
The reason? Delivery lags.
It takes between 20 and 40 days for tankers to carry oil and oil products from the Persian Gulf to the Asia / Oceania region where 85% of this production is destined and time is just about up.
We can see below how abruptly tanker traffic through the Straits of Hormuz dropped-off after the February 28 attack dropping by 90% on March 2 where it has been pinned.
Figure 1 - Strait of Hormus Daily Ship Traffic; source: Lloyd’s List / Sal Mercogliano (WGOW Shipping) @mercoglianos - twitter/x.com
We are currently at day 29 after the oil shipment drop-off seen above and day 40 will be April 11.
At that point, the 15 million bbl per day (Mbpd) of oil and fuel products received in Asia / Oceania is estimated to have dropped to just 4Mbpd.
Fortunately, not all oil and fuel products used in this region, that imports 25Mbpd, are from the Persian Gulf region.
Weekly deliveries of oil-based energy imports are currently down 20% in Asia/Oceania and that decline is projected to increase to down 44% within the next two weeks.
This 44% decline in oil fuel imports reflects a 26.5% overall decline in total oil supply factoring-in regional production.
However, these numbers are averages reflecting region-wide import supply.
Most Impacted Countries
Some countries draw extreme amounts of their daily oil-based fuel from the Persian Gulf: the Philippines are 95% reliant on the Gulf, while Vietnam is 88% and Malaysia is 69% Gulf reliant.
Fuel stockpile reserves in these three countries are 60 days, 15 days, and 45 days of consumption respectively.
Securing alternate fuel imports becomes very important, very quickly.
A New Oil Price Will Rapidly Be Discovered To Balance Demand
The market pricing mechanism is what provides abundance in a market economy by bringing added supply to where it is needed most.
But keep in mind that the pricing of oil is priced not on an average supply/demand basis but at the margins. The price is regionally set by what a buyer is willing to pay for the last barrel of oil. And that may be a lot.
Given that oil sustains life, this means that securing this delivery will dictate potentially very high prices (i.e. multiples of the current price) if needed to secure delivery.
And oil is fungible and can be transported globally to meet demand which means higher prices are coming globally, if needed, to ensure that adequate deliveries of oil are received.
The coming weeks are going to see an increasing supply squeeze in the global oil market. Step by step, supply will be decreased and reserves will be drawn-down.
The consequences will not be pleasant.
If it is chosen that this war continues, the consequences will be drastic not just in the Middle East and Asian regions.
Best regards,
David Jensen
If the forces that initiated this war didn't actually intend to torpedo the world's economy, then they were criminally negligent in not foreseeing it. And for every day that they continue the war, it becomes more likely that causing massive financial havoc is the goal. To what end, you rightly ask?
The US-Israeli empire knows it's financially doomed. It cannot escape the black hole its created in its own financial system. So rather than be sucked into the void, the US is blowing its system up. It will soon default on its debt. But before resetting its own system back to zero, the US is causing as much collateral damage as possible to cover for their own vulnerability during the transition. And of course to profit from the skyrocketing price of petroleum.
That's only a working theory. Maybe they're just criminally negligent.
Thanks David, greatly appreciate your insights.
If you work backwards from what the powers that be have been telling us since at least 2015 (around when I started listening anyway). We'll own nothing, 90% of jobs will have gone to AI, no more private transport and a one world government, digital ID, attached to your digital wallet which contains your monthly UBI lifeline, which has a monthly expiry date to use or lose it, so no saving for holidays etc. And misbehave and the lifeline stops.
How do you get the population to agree to a total loss of freedom......you force them via bankruptcy. I expected it sooner, I thought Convid was the kicker, amazed me how slowly they creep as not to alert too many people. I can only see this ramping up quickly over the coming months. I grew up an atheist, I now believe there is a God, goes by many names, could just be called life, I find myself praying to that higher consciousness that we find our way through this.
I don't think it's any coincidence that all this is happening as we lead into the next Grand solar minimum, around 2030, where the sun will go to sleep for 15 years of the first solar cycle, then be greatly reduced for the next 2 cycles, 30 years. But bizarrely so, very few are talking about this,
Good luck people!