The Economic Collapse

Unless we witness some sort of a crazy diplomatic miracle, the price of gasoline will soon rise into unprecedented territory. The Iranians have closed the Strait of Hormuz, the Houthis are blocking Saudi tankers from getting through the Bab el-Mandeb Strait, and with a big helping hand from the United States the Ukrainians are relentlessly attacking Russian oil refineries. Meanwhile, the oil inventory buffers that existed before the war with Iran are rapidly being depleted. Nations around the world are doing whatever they can to adjust to this crisis, but time is running out. (Read More...)

I really don’t understand the tremendous apathy that I am witnessing right now. Everyone can see that commercial oil inventories are rapidly being depleted. As I discussed yesterday, the global oil market had about 400 million barrels of excess inventory before the war, and now we have “close to nothing”. But at least we still have the Strategic Petroleum Reserve, right? Yes, that is true, but that is being rapidly depleted as well. In fact, when you add the dwindling commercial oil inventors in the U.S. to the oil that is left in the Strategic Petroleum Reserve, we only have 43 days of supply remaining… (Read More...)

The only way that we were going to avoid a historic oil crisis was if a diplomatic solution could be found to end the war in the Middle East. Obviously that did not happen. The “Memorandum of Understanding” has completely failed and the U.S. and Iran are hitting one another really hard. The Strait of Hormuz is going to be closed for the foreseeable future, and now it appears that the Bab el-Mandeb Strait will soon be closed as well. Global oil inventories have been falling for months, and now we have reached a stage where we are going to experience some really severe pain. (Read More...)

The cost of living has become absolutely suffocating for millions of Americans. For years, the bureaucrats in Washington have been feeding us numbers that show that the rate of inflation is low, but it is obvious to everyone that what they are telling us is simply not true. Many of the items that I regularly purchase at the grocery store have more than doubled in price over the past decade. Some have more than tripled in price. When I get to the register to check out, I feel like asking the cashier which organ I should donate to pay for my groceries. (Read More...)

Now we are going to get to see what really happens to the global economy when the Strait of Hormuz is completely closed for an extended period of time. Before the war, approximately 45 percent of all Asian oil imports traveled through the Strait of Hormuz. The Chinese normally get more oil from the Middle East than anyone else, and the amount of crude oil that they have been importing has collapsed. That is not sustainable for the Chinese, and they are getting very angry. At the same time, relentless drone attacks on Russia’s energy infrastructure have forced the Russians to buy gasoline from India. If the Strait of Hormuz remains completely closed for months, global energy supplies will get extremely tight and the price of oil will go into unprecedented territory. (Read More...)

There will be no negotiations over the Strait of Hormuz. There will only be fighting. The U.S. and Iran will now engage in an all-out war for control of the Strait of Hormuz, and the consequences will be felt by every man, woman and child on the entire planet. Traffic through the Strait will be paralyzed for the foreseeable future, and there will be a severe worldwide energy supply crunch as a result. Since neither side intends to surrender, the only way that the crisis ends is for one side to achieve military victory. The U.S. military cannot take out the Iranian missiles and drones that are threatening commercial traffic through the Strait from the air. If that was possible, it would have been done already. To fully eliminate the threat of Iranian missiles and drones, it would require either boots on the ground or nuclear war, and both of those options are unthinkable. So unless a negotiated solution somehow materializes out of thin air, we have got a giant mess on our hands that has no easy solution. (Read More...)

We knew that this wasn’t over. The ill-fated “Memorandum of Understanding” may have delayed the inevitable, but now the ceasefire is dead and fighting is raging throughout the Middle East all over again. Sadly, we shall soon see just how far both sides are willing to escalate matters. In my opinion, we are going to witness some absolutely shocking escalations in the months ahead. None of the parties involved in this war have any intention of backing down, and I am convinced that some very shocking “surprises” are ahead. (Read More...)

A lot can happen in 48 hours. Just two days ago, things were relatively calm in the Middle East and global financial markets were humming along. But now everything has changed. Just like that, the ceasefire is over, the price of oil is soaring and stock prices are plummeting. It appears that all-out war in the Middle East is the scenario that we are now facing, and that has all sorts of crazy implications. I cannot even begin to describe how serious this is. The possibility of a peace agreement kept both sides from really pushing things over the edge for a long time. Now that there is no longer any hope for peace, events could spiral out of control very quickly. (Read More...)