A Massive Energy Break Coming Soon || June 5, 2026
We're slipping closer and closer to a major oil supply crunch. With the Persian Gulf still shut in, global inventories almost depleted, and threats to other oil supplies, the world doesn't have enough oil to keep things running for much longer.
The Chinese have been able to substitute some of their oil demands with coal-based products, but this is just a band-aid. Eventually, oil prices will spike, and certain consumers will no longer be able to afford petroleum products, leading to demand destruction.
Northeast Asia will be hit hardest due to its heavy reliance on imported oil, but even Europe will have issues, despite having alternative supply sources.
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Comments (59)
Alright it’s August now………….
This hasn't aged well. Why? Were the "experts" dead wrong? More oil moving through the mentioned bypass pipelines? US, Venezuela, Russia, Africa, etc. supplies offsetting the loss of ME oil? Is overall demand simply down? Genuine question(s).
This hasn’t aged well, yet anyway
Help me to support on YouTube
Is this crisis as severe as you portray if the peace agreement does get signed since there are estimated roughly 300 loaded tankers staging in the Gulf, representing potentially 500–600 million barrels of crude and petroleum products stranded now ready to come out of the Strait when it is opened?
Peter should do a follow up...over 100M barrels were shipped out under US protection. Prices are dropping...
Then why is oil down 3.56 percent today?
Petrol prices are lower now than before the war here in beautiful Port Stephens, Australia
I believe you said this 2-3 months ago
Iran will only be effected by an oil crunch if either (1) you destroy or occupy Kharg island and they can’t export; and (2) you destroy their entire domestic refining capacity. Doing either 1 or 2 leads to them trying to do the same to the GCC countries. Therefore neither 1 or 2 will occur and the world will keep suffering. I suppose the only good thing in all this is that once demand destruction at this scale because of these reasons - it’s usually both structural and permanent.
Middle distillates are more critical. The world runs on JetA and diesel.
Interestingly enough, I had just run across this video the night before this post came out and had wanted to ask Peter how much energy it would be possible for China to produce using this kind of technologies. Peter did comment on this some, but I'd like to hear this in more detail. https://www.youtube.com/watch?v=DczaTKF4UNw On another note, speculating about just why Trump chose this particular time to attack Iran. My understanding is he'd been golfing on the day he ordered the commencement of hostilities. I kind of wonder if he was losing. It is a time-honored strategy for a leader who is not doing particularly well to create a diversion—such as a military conflict—to distract the public from a domestic scandal, political crisis, or losing a round of golf.
How do non-contiguous US territories even respond to this? What does a place like Puerto Rico, American Samoa, Hawaii or Guam even do to respond to the current trajectory? What does a rationale State or Federal response even look like in an island energy crisis?
What cay one say “The World is Upside down” KJ
Kjwhite3@gmail.com
Markets are down today but you know all Trump has to do is say, "The war is over! The treaty is going to be signed soooooo sooooooon!!" for the hundredth time and they'll just bounce back up again, sigh.
It's not that I doubt you, Peter, I just don't understand why I don't see the markets or the politicians or the media - mainstream or Fox - aren't in a panic. What's the deal?
People have a hard time adjusting to new data that's outside their prior experience. News media as well. Remember COVID? I bought masks and was telling people to get ready in January... it was obvious then to people who were well informed. The markets and the media trundled along blissfully until mid-March, just reporting on the small, early disruptions (remember the cruise ship?). It was a Trump administration back then, too, following the same playbook of lying and pretending that everything was just fine in order to prop up the markets.
Will be interesting to see whether this energy crisis actually happens, as right from the beginning of this conflict the Cassandra‘s were saying that this is the largest energy shock since the 1973 oil embargo by the Middle Eastern countries. So far many countries around the world, particularly first world countries have managed to find a way around this. I am somewhat skeptical that there is going to be some massive disruption as Peter and many many other Talking Heads claim.
If this is such a global disaster why aren’t there any boots on the ground stomping the crap out of the IRGC. We aren’t the only ones with toys that go boom. I guess no one wants to help out the Narcissist in chief. Europe and China will be munching popcorn and drinking beer while Trump flails like a fish out of water. Nope, not going to help out the clown in the Whitehouse regardless how bad it gets, right?
A quick trip into GROK said that somewhere between $200-300 / barrel all commercial jet traffic may stop as jet fuel will become too costly to run the jets. Happy summer!
ALL HORSESHIT! ALL MANIPULATION of MARKETS PLANNED WAY in ADVANCE!
This is the relative to the rest of the world, right? The USA is fairly oil independent. I know the prices will go up as the world cost goes up, but it is not like the US is heading for the 1970s Oil Crisis.
The problem is that U.S. refineries are set up for heavy, sour crude, while most of the fracking oil is light, sweet. Peter doesn't explain this, but what's being exported to Europe is probably our light, sweet crude because their refineries can handle it. This is also why Trump wanted Venezuelan crude (heavy sour) because we can use it in our Gulf Coast refineries. It takes heavier crude to produce diesel, jet fuel and bunker fuel for ships, so the shortages aren't evenly spread. U.S. gasoline is best buffered; transport fuels (as we've already seen) will go up more.
June 21st. JUDGEMENT DAY.
Summer Solstice. Maybe Trump is a Wiccan?
Translation: Almost everyone on the entire planet will be cursing Trump's name soon (if they haven't already).
We are a net *importer* of crude by about 2.3 million barrels per day. LNG we're a big exporter of. We are, by far and away, the world's largest producer of natural gas. But talking crude as if it's the same as the rest is somewhat disingenuous.
Will an energy crisis kill the AI bubble? Or is the AI bubble “too big to fail” and instead will the energy price increases be passed on to consumers?
Now that the AI companies are stopping their subsiding the costs to their customers (what cost $150 in April jumping to $10,000 for May), the AI companies themselves are starting to walk away from their own construction plans.
If I understand PZs previous discussions, as well as other sources, there should be minimal impact to US supplies as we get most of our heavy crude from Canada. And we export a lot of our light crude. What I don't necessarily understand is whether gas prices will continue to rise in the US as supplies to other countries diminish. I understand supply & demand. But it seems like we have a somewhat captive market where Canada has limited options where they can sell their crude and our refineries are reliant on Canadian crude. So other than just greed, I'm not sure why our gas prices are high.
Oil is priced globally, not locally. A futures contract is not determined by who buys it, just who is willing to pay the most. When Keystone was nixed, Canada finally built a pipeline from Alberta to Vancouver, and a lot of Canadian oil is now going overseas. The US is a net importer of crude oil. About 65% of the crude we produce today is fracked and our refineries were designed and built to refine increasingly heavy and sour oil, not the light sweet oil that comes from fracking. We haven't built a new major refinery in 50 years. Who wants to spend and finance a huge project when the whole world has been saying your industry is headed for the dust bin of history?
Perfect! Prices should go up just in time for the midterms.
If this drags on the whole year I wouldn't be shocked to see $8 gas\ 10$ diesel. Diesel inflation will cost you on everything you buy including food unless you grow your own. (Might be a good time for a home garden. Research Humanure. Fertilizer might become very expensive. I've heard rumors of possible wheat shortages this year. Harvest expected at a 54 year low. Food shortages. In America. WTF?
We are waiting!?! It is not that I don’t believe you. It’s just that the entire market disagrees with you. Trillions of dollars are betting that we are going to be fine. The smartest people in the world with real skin in the game are taking the other side of this bet. So how do we square this circle?
I guess it depends on your definition of "fine" and over what time range. When 20% of the supply is taken off market, 20% of demand has to be priced out of the market. There will eventually be some increases in supply from other places, but that takes time. Years, usually. The fact that we have fracking doesn't really help, since our refineries were not designed and built to refine light sweet oil. Simple math, really.
And this whole self imposed energy crisis was done for reasons the administration to this day cannot explain. Marco Rubio said we were doing it because the Israelis were going in no matter what. Trump said it was to prevent a nuke without any evidence and he had said last year that we had destroyed their capacity to build a nuke anyways. The secretary of defense says that it is a holy war, and we have to wage a Jihad against Iran. History will look back on this moment with the Leonardo DiCaprio meme saying simply “ what the fuck is going on”
When we went in was determined by Israel's choice, but not why. As long as Iran can gain access to their previously enriched uranium, they are close to a nuke. Iran is not a country that we want to have nukes. We tried diplomacy with North Korea and it didn't work. Iran, if anything, is even less persuadable. SecDef can take a long hike off a short pier, as far as I am concerned.
China is watching the Strait and licking it's chops. It's seeing it doesn't have to invade Taiwan, just blockade it when it wants and cut off the worlds supply of chips at the dawn of the AI age. That would be "grabbing them by the silicone!" They can then dictate terms to the whole world. If the US is helpless against Iran, anyone think Trump would risk nuclear war with China?
That is a super scary and ever more likely scenario, gulp.
In practical terms how will these dislocations show up in the U.S. economy?
How much inventory is floating in tankers right now. Would that mitigate short term demand?
I think that is baked into the estimate. All the "slack" in the system will be played out just in time for the 4th of July! Review the term, "Inelastic Demand". It will get ugly fast. We can scrape and mitigate until about July. Time is on Iran's side. Trump has no cards.
End of June, Tell me did India receive fertilizer in time for planting ?
9 weeks ago these countries only had 3 weeks left. 6 weeks ago it was supposed to happen this week.
We've been able to tread water by dumping out of our Strategic Reserves which is supposed to be for like nuclear wars and stuff. We're like the Donner Party that still has some leather shoes and belts to boil before they have to start cutting into the dead.
It would be interesting to do a follow-up on second order effects. In those economies that have the $ to pay, so that demand destruction is more limited, those $ are being pulled from other places... savings, capital investment, consumer spending, etc. That's broader economic disruption than just oil. Where will that be concentrated?
But with less oil products being consumed global warming will slow down!!
Yes, well, a nuclear winter would slow down global warming too.
I can’t get the sound to work on half of these videos
What impact on global health and agriculture?
Good thing we thoroughly thought out all these consequences and carefully determined the best course of action prior to the bombing campaign
Otherwise we’d be facing a severe global energy crisis. Luckily for us this war is practically over. 3D chess baby.😂
I do wonder how the oil crunch crisis will imapct Iran? Will they be hurting as much as the rest of the world, or not? Is the Iranian economy on the edge of the economic abyss, or will they be able to muddle along, indefinitely? Will sanctions on Russian oil products be lifted simply to address the crisis? Clearly Trump's decision to launch a half-assed war on Iran is the biggest presidential blunder of this century so far. I don't see any way to make it right any time soon by any means. Even simply walking away leaves the strait under IRGC control. Lots of questions, few answers in the crystal ball at the moment. Trump's legendary incompetence is becoming very scary.
They will certainly suffer the way the Iraqi's did for 12 years. We sanctioned and bombed Saddam Hussein for 12 years and his regime didn't topple or give in on inspections. Boots, tanks, and 20 year occupation is the only way to guarantee Iran will not possess a bomb. They'll just start again after you leave. If we really want Iran to give up it's nuclear ambitions, maybe we need to make Israel give up theirs as well. Would we have ever been willing to disarm unilaterally and let the Soviets keep their missiles? Is that a reasonable thing to ask of Iran? Dismantle the nuclear programs for both. I don't think any of the countries in that region should be allowed to have nukes. They are all a bunch of whack-jobs.
The Trump economy kicks in.
Ty Mr Trump...
Hey everybody! Let’s all walk to work and #DemandDestruction!
There's going to be work?