Joel Bowman with today’s Note From the End of the World: Buenos Aires, Argentina...
Day by day, the fog or war grows thicker...
This week we passed the one month mark since the closure of the Strait of Hormuz, that vital energy choke point through which ~30% of the world’s seaborne traded oil flows...
...or at least, used to flow.
Is there an end in sight? A diplomatic off-ramp for Washington or Tehran? What would “peace in the Middle East” even look like at this point?
And for those of us in the cheap seats, at one End of the World or another, how long until planes are grounded, trucks run out of gas... and the lights go out?
There’s a lot that goes into figuring out such equations. And the answer will be different depending on where you’re reading these Notes. (Speaking of which…)
Days Until Empty
As our friend Bill Bonner likes to say, “What you see depends on where you’re standing.”
South Korea, for example, has ~200 days worth of supply in its Strategic Petroleum Reserve. Japan has ~150.
Over on the Continent, France, Germany and Italy each have about ~90. The UK has ~30.
Meanwhile, end-of-the-line Australia – which imports a whopping 90% of its refined oil – has just 36 days of petrol... 32–34 days of diesel... and 29–32 days of jet fuel. At least, that’s according to the country’s state broadcaster, the ABC.
Tick tock... tick tock...
But even if our all-knowing, all-powerful Dear Leaders could broker a deal tomorrow... if that 5-D chess we’re always hearing about were to draw to a favorable endgame... if everyone could just kiss and make up... it’s not as though one simply flips a switch and resumes business as usual.
Leaving aside for a moment the fact that many major oil and gas facilities have sustained significant damage during the exchange of heavy ordinance since the war broke out (South Pars Gas Field in Iran… Ras Laffan Industrial City in Qatar… Mina Al-Ahmadi Refinery in Kuwait… Haifa Oil Refineries in Israel)...
... and forgetting the fact that entire crews and personnel have been evacuated and relocated around (and even out of) the region...
... and that literally hundreds of tankers are stranded up and down the Strait...
... there remains the sheer logistical challenges involved with just bringing supply back online, a highly complex engineering task even under controlled, predictable conditions, where all hands are on deck and supply chains guarantee delivery of necessary parts and equipment in a timely manner.
Then there’s the less obvious – but no less critical – bottleneck in global insurance markets. Who’s going to underwrite the first tanker to make the run? And who’s gonna captain it?
With these questions and plenty more on our mind, we reached out to our friend Byron King for some key insights...
Not only is Byron a Harvard trained geologist who began his career with Gulf Oil Exploration and Production back in the day, he also served as flight officer for the U.S. Navy. At one point, he was even an aide to the United States Chief of Naval Operations.
Byron has traveled extensively throughout the Middle East, even modeling out military simulations for the navy should precisely this circumstance come to pass. In other words, he is exactly the person to shed some light on what’s going on right now.
We caught up with Byron a couple of days ago to discuss all this and plenty more. Please enjoy our in-depth conversation, above, and do be sure to check out Byron’s prolific writings for our friends over at Paradigm Press, where he contributes regularly to our old almae matres, The Rude Awakening and The Daily Reckoning.
And as always, stay tuned for more Notes From the End of the World...
Cheers,
Joel Bowman
P.S. As war in Iran truly impacts people all over the world, we’ve decided to keep this episode free for all. Please consider liking and sharing it, as doing so helps our visibility on this platform…
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