There have recently been many warnings about near-term oil shortages stemming from the conflict in Iran. Most analysts assume that shortages mean higher prices. As I will explain, the dynamics of a self-organizing economy suggest the opposite outcome — lower prices, deepening recession, and shortages of goods and services that have little to do with price.
Rather than high prices, my major concerns are recession and the disappearing availability of goods and services that we rely on. This might be similar to the empty shelves that many stores experienced in 2020 and 2021. There may also be new government restrictions, intended to work around the reduced oil supply in a way that will allow essential services to continue to operate normally. Oil prices are likely to fall below $40 per barrel, as they did in 2020 with Covid restrictions.
In this post, I will try to explain why this counterintuitive outcome — shortages leading to lower prices rather than higher — is what the self-organizing economy tends to produce. Along the way, I will look at the current state of oil reserves, why the conflict with Iran is unlikely to be quickly resolved, and what the price behavior of oil since February 28 tells us. I will also step back to consider the broader picture: why war can seem like a solution to struggling economies, and what the 2020 Covid experience might teach us about what lies ahead.
[1] Reserves of already-pumped US oil have dropped to concerningly low levels.
On June 17, President Trump said, “We will run out of reserves in about four weeks without a deal.” According to the article, we are not certain whether Trump intended to apply this statement to US or world emergency reserves.
Also, according to this recent video, the US’s largest tank farm seems to be very close to the minimum level at which crude oil can be withdrawn from its tanks. And, on June 23, MSN said, “America may see actual gasoline shortages by July 4.”
The already-pumped oil in storage is intended to be used as a buffer if there are variations in supply or demand. The reason that these buffers are falling low is because considerable oil from them has already been used to mitigate the shortfall in crude oil supply to date.
The shortfall in the supply of crude oil supply cannot be expected to disappear quickly. There has been considerable damage to infrastructure in Iran and elsewhere. It will take years rather than months for this to be repaired. In countries where oil production has been shut in, some wells are likely to produce less after being reopened following many months of closure. Furthermore, Iran has no incentive to completely reopen the shipping lanes, since keeping them potentially closed has the potential to raise oil prices per barrel. Higher oil prices would help the finances of Iran.
[2] Perhaps because of concern about low buffer supplies, the US has negotiated a deal with Iran that seems unfavorable to the US.
Information keeps coming out that indicates that Trump’s current Memorandum of Understanding (MOU) is very favorable to Iran. It looks as if the MOU has been written as if Iran won the war. We are also seeing that other countries have begun acting as if Iran has indeed won the war. For example, on June 23, a joint statement was issued by Iran and Oman. The two countries seem to be co-operating in setting up the collection of funds from ships passing through the strait to cover insurance and other costs.
If we are dealing with a “done-deal,” and the US is coming out poorly, the level of conflict within the US is likely to rise. Many people will be angry with Trump for getting the US into the war to begin with. Unfortunately, there is likely close to nothing we can do about this situation.
[3] Trump or another leader cannot restart the war against Iran and expect to do any better.
A major problem is that the US has substantially depleted its ammunition supplies, and it will take years to replenish them. While the US could perhaps launch a short attack, it would not be able to carry out a sustained campaign for very long.
Another issue is that the armaments that the US has stocked to date are designed to be used in a different type of war than the one that is being fought today. The US needs drones and close-by locations from which to launch them. Iran damaged most of the US’s bases that are close to Iran in the conflict that began on February 28. Without substantial rebuilding, the US has no functioning bases close to Iran from which to launch such drones.
Restocking armaments will likely take several years, especially if new types are needed. Adding to the difficulties of the US is the fact that China has been the primary source of many critical minerals used in the production of high-tech goods and ammunition. In recent years, China has restricted access to these critical elements. The US is now developing mines for some of these minerals, but setting up entire supply chains will take years.
[4] One motivation for attacking Iran might have been to raise oil prices to a higher level.
Based on their models, economists typically reach the conclusion that inadequate oil supplies will lead to high oil prices. It is likely that President Trump and his advisors believed that inadequate oil supply would lead to high oil prices.
Some analysts, including me, would argue that the models of economists are very inadequate; they give misleading indications by leaving out the complex self-organizing nature of the economy.
Higher oil prices are sometimes desirable because they encourage more oil extraction. For example, higher prices allow marginal wells to continue to be profitable longer. They can also make a new, higher-cost source, such as tight oil from shale, attractive for drilling. Looking ahead, higher oil prices would make it easier to get oil company support for ramping up oil production in Venezuela.
Figures 2 and 3 show the connection that higher oil prices seem to have had in encouraging tight oil extraction from shale. Figure 2 shows historical oil prices, adjusted for inflation. Noted on this figure is my view of whether prices were high enough to encourage extraction from more difficult locations.
Figure 2 indicates that prices started to run up in the 2003 to 2008 era, when China started ramping up its manufacturing, and thus its demand for oil. In this same timeframe, there was also a growing demand for housing in the US, thanks to very liberal underwriting standards for home mortgage loans. Thus, the total demand growth for oil was very high.
Figure 3 shows that production of tight oil started ramping up in 2009, after oil prices had been rising for several years.
Another factor in the growth of tight oil production was the availability of cheap credit after 2008, but this has tended to disappear since 2021. Now, tight oil production seems to be leveling out, leading to rising concerns that tight oil production may soon decline, especially if credit is no longer cheap. Having higher oil prices might help postpone the decline of tight oil.
[5] Oil prices since the war started on February 28 have not bounced very high. Recently, they have tended to fall back, close to their pre-war level.
The first thing to note is the fact that the prices on Figure 4 do not reflect the actual prices to the consumer, which have often been greater. The cost of transporting oil has jumped in many markets, but this higher transport cost is not reflected in the “West Texas Intermediate” price of oil, displayed in this chart. These higher prices at the pump have led some of the more price-sensitive buyers of oil products to cut back on their purchases.
Second, there is a lag issue regarding how soon the impact of missing supply actually hits the market. The slow transit time of oil from the Middle East to markets means that the actual disruption of supplies did not hit until at least 50 days later. If crude oil first needs to be processed by local refineries and then the oil products shipped to customers, the lag would be even greater–perhaps 75 or 100 days in total. Thus, much of the price increase to date may be based on a fear of shortages, rather than on an actual shortage issue.
Third, there have been some changes that impact oil “demand.” Some consumers have been told by their governments to work from home or otherwise restrict their driving to save on oil consumption. Also, some flight schedules have been cut back. Recently, Ukraine has been targeting some of the oil infrastructure of Russia, leading to reduced gasoline and diesel availability within that country. All these issues have tended to reduce the demand for oil. The lower demand acts to hold down oil prices.
A fourth issue has to do with worldwide economic conditions before February 28. Even before the war, much of the world was in close to a recessionary situation. There were very many low wage earners who could not afford much beyond the basic necessities of life. Even a small run-up in oil prices tends to affect food prices because oil is often used in farming operations and food is usually transported to market using oil. With higher food prices, poor consumers were forced to cut back on other purchases. This recessionary dynamic can be expected to get worse if oil prices inch up even a bit.
[6] I expect that oil prices will continue to remain relatively low, or they will only briefly rise to high ($150+) levels, even if there are actual oil supply disruptions.
I expect that the dynamics we have been seeing since February 28 will continue, and may intensify. Governments will add new restrictions that will reduce oil use. Airlines will go bankrupt, or they will reduce flight schedules. Recession will become even more of a problem. These issues will tend to reduce usage without raising prices.
[7] What we may see more of is broken supply chains.
There will be more signs in grocery stores and in home product stores saying, “This product is temporarily unavailable.” Car repair shops may tell us that a required replacement part will not be available for several months. Physicians may tell us that a medicine or chemotherapy drug that they normally use is, at this time, unavailable.
[8] The operation of the economy depends on an adequate supply of many kinds of energy. If oil supply is reduced, an economy needs to shrink to a smaller size to match. This is what leads to recession.
One reason for the above observation is that we know that our own vehicles will not operate without whatever fuel they are designed for. This is clearly also true for all the delivery trucks in the world, and for farm machinery and for ships that transport goods across the ocean. With less fuel, fewer trips of many kinds will be made. Workers will be laid off. This dynamic sounds a lot like recession.
The expected lower world oil supply in the near future is not an issue that can easily be resolved. We are already seeing that even with a supposed settlement, disruption in oil supplies seems likely to continue and even to worsen, as the various limits on buffer supplies are reached. Unfortunately, we cannot expect the situation to be completely fixed for several years.
Furthermore, the economy is facing even more disruptions than I have outlined above. For instance, Ukraine has been disrupting Russia’s oil infrastructure with drone attacks. There have also been disruptions to sulfur exports from the Middle East. Sulfur is used in many ways, including as a fertilizer and in the production of sulfuric acid, which is used in the mining of uranium, among other things. In addition, there have been disruptions to liquefied natural gas (LNG) exports from Qatar. The lack of these important products will tend to further damage supply chains and lead the economy deeper into recession.
[9] We are ultimately dealing with multiple not-enough-to-go-around scenarios. This situation will tend to increase conflict in the world.
The dynamic we are dealing with is similar to that in the game of Musical Chairs.
The game of musical chairs is played in rounds. Players walk around the edge of a circle of chairs while music is played. When the music starts, the number of players is equal to the number of chairs. In each round, one chair is removed. The music plays and then suddenly stops. The players must then scramble to grab a chair. Since the number of chairs is now one fewer than the number of players, small fights can ensue.
The problem is basically, “Not enough to go around.” War often sounds like a reasonable solution to leaders.
[10] War can seem like a solution.
Strangely enough, war has multiple advantages to economies that are suffering from difficulties related to low commodity prices and, indirectly, low wages in related industries. One commodity is food. If food prices are too low, farmers will be unhappy that their earnings are low. They may stop farming and try to make a living from putting their land into a land bank and working elsewhere.
If oil prices are low, the oil industry can experience pockets of low wages. There have recently been reports of lockouts and strikes in the oil industry. I would expect these labor actions to be most prevalent where oil fields are depleted.
If a government announces a war, it looks like the government is “doing something” about the country’s problems. There is suddenly employment, either as a soldier, or in building armaments. GDP tends to rise because the war leads to a larger share of the population working. The war can be used to justify the additional government debt needed to hire the additional workers. What convinced me of this relationship was this chart, showing a huge increase in US GDP during World War II:
Looking closely at the chart, it is also possible to see GDP increases during the Korean War (1950-1953) and between the time the US entered the Vietnam War, deploying up to 549,000 soldiers, and the time the US greatly reduced its forces there (1964-1969).
I think much of Europe is now in a situation in which war looks like a solution. Russia may also be in such a situation. Ukraine, with its problems, is also in such a situation.
[11] There may be lessons to be learned from the 2020 Covid restrictions and the ultra-low oil prices that resulted then.
Back in 2019, many people in the financial world were concerned about the economy. In 2019, the US faced significant financial issues, including a budget deficit that increased by $205.4 billion to $984.4 billion. In addition, in September 2019, there was a spike in the interest rates financial institutions charge each other (repo rates) that concerned those who followed financial markets closely.
What took place in 2020 seemed to some of us to be close to miraculous. The strange actions related to Covid greatly brought down the price of oil. Covid also provided an excuse to give money to households. US government debt was able to increase greatly, and, somehow, the world economic system has held together until now. Financial problems were “kicked down the road” a while longer. Without the pressure of financial problems, the economy could work on ways to mitigate the energy problem a while longer.
Economies are self-organizing systems, just as the human body is a self-organizing system. Both are powered by “energy dissipation.” Human bodies tend to heal wounds, like magic. Economists talk about an “invisible hand” being helpful to economies. In situations where the healing of economies does occur, low oil prices can be part of the magic.
[12] What might be ahead?
We are again in a period when the US and world economies are on shaky ground. Debt levels are high, and conflict levels are high.
As I have discussed in this post, I expect the general trend in oil prices will be down, rather than up. The major reason why oil prices are likely to be low is because, with the damage done in the Middle East, the quantity of oil supply available to the world is starting to shrink. As a result of the low oil quantity, the world will produce fewer goods and services. This is close to the definition of recession! (Also, on Figure 1, this is why we expect Wile E. Coyote to fall down, rather than to float up, when his support disappears.)
I expect as oil product shortages hit, local leaders will figure out ways to mitigate the oil bottleneck that the world now seems to be facing. Local leaders will enact rules that make certain that whatever oil is available is used to maintain essential services. It will not be surprising if local leaders keep people at home, using one excuse or another, to keep oil demand in line with the quantity of oil that is available. This is a big part of why oil prices will tend to be low, in a manner similar to 2020.
With low oil prices, I expect that inflation will be low. Pressure to keep raising interest rates will disappear. The economy will not be doing well, but the issue will not be high interest rates preventing new investment.
In my opinion, the world economy needs to reorganize with shorter supply lines to get through the oil “tight spot” that the economy is in. If supply lines could mostly be kept within the areas marked on Figure 7, it seems like a significant amount of transport fuel could be saved.
The conflict with Iran doesn’t seem to be ending well for the US, but there might be a silver lining. The pain the US is experiencing in Iran will hopefully teach the US to stay out of issues in the Eastern Hemisphere. If a conflict with Iran is to ramp up again in the near future, I expect that it will be a European group that will be getting involved, not the US.
We don’t know quite what is ahead, but the experience in 2020 shows that a strange confluence of events leading to low oil prices can actually be helpful. Let us hope that a similar result will be possible this time.
Don’t want jinx it but looking like it’s over?
Ships moving through south passage in convoys
Money changed hands?
Reports all the groups that form in pentagon when operations active back to 9 to 5.
China not topping off SPR. Better price ahead? Japan buys that oil.
China declining purchase changed Irans perspective?
Money changed hands?
No bragging no drama but ships transiting south channel?
Just like that? Peace breaks out? Ho hum? All irreconcilable manifestos from both parties down memory hole?
China told everyone to behave and it stuck? Both parties twiddle thumbs and stare at ceiling talk sports?
https://m.youtube.com/watch?v=S_svsJ1ijRg
The WSJ has an article up called,
What Happened in Fuel Markets When Trump Lifted the Century-Old Jones Act
California drivers, Gulf Coast refiners and Puerto Ricans have benefited from temporary suspension of the act
One of the most drastic measures taken by the Trump administration to tame fuel costs during the Iran war: suspending the Jones Act to allow foreign ships to haul fuel and other industrial commodities between U.S. ports. . .
[In the first 90 days] More than 31 million barrels of fuel and chemicals were shuttled between U.S. ports by foreign vessels. About 67% of the cargo volume was refined products, such as gasoline, diesel and jet fuel, and about 26% crude oil. Propane, fertilizer and bitumen were also shipped.
More than 70% of these shipments originated on the Gulf Coast, home to more than half of U.S. refining capacity and numerous petrochemical facilities and fuel-export docks.
The most popular destination has been California, which depends on Persian Gulf imports and has the highest gasoline prices in the country. Gasoline has been shipped to California from refineries in Texas and Louisiana and Washington. [Gail’s comment-this must have been shipped through the Panama canal.]
Intrastate trade routes emerged. Crude oil moved from Los Angeles, where pumpjacks bob around the city, to a refinery near San Francisco. That refinery sent fuels back to Los Angeles, where gasoline prices are roughly 40% above the national average. [Gail’s comment–shipping by boat likely took the place of a pipeline that is being shut down, because of lack of profitability–too little local crude oil.]
. . .
“We displaced international crudes with domestic grades into our refining system and sold the international barrels into tight overseas markets,” Brian Mandell, a Phillips 66 executive, told investors in April.
There is a political question now regarding whether this suspension should continue.
B at the Honest Sorcerer has an excellent post up about the new 2026 Statistical Review of World Energy, and what it indicates.
https://thehonestsorcerer.substack.com/p/infinite-growth-delusions-continue?utm_source=post-email-title&publication_id=1498475&post_id=204296321&utm_campaign=email-post-title&isFreemail=true&r=222ei&triedRedirect=true&utm_medium=email
He correctly observes that the text that the Energy Institute puts out is pie-in-the-sky nonsense about the future. Renewables will save us, etc.
B points out that the section showing reported oil reserves has been deleted from the report. B tells us what RystadEnergy is saying instead. The problem seems to be that reserves are now declining, so they are no longer being reported.
Much of B’s analyses is about the consumption of transportation fuels. These are gasoline and diesel (and perhaps a bit more, such as jet fuel). B shows that these uses peaked in the US, EU, and China years ago. The charts he shows are not “per capita.” The downturn would be earlier and more severe if per capita data had been shown.
This post is called
“Infinite Growth Delusions Continue – For Now”
When conflict of interests meets reality
He thinks the Energy Institute folks and the people providing the data have a severe conflict of interest in telling the truth.
I thought the cannibalizing of heating oil to produce more diesel in the 80s was an interesting point.
He said that huh? Cannibalization is a zero-sum game. I don’t imagine that there were any zero sum game dynamics at scale in the 80s. It could only be called a cannibalization if there was a diesel shortage at scale and people were left out in the cold at scale due to the cannibalization. Does he at least argue that that was the case?
Electricity from nuclear, the way it was done back then (cheap construction, plentiful uranium) was definitely beneficial. The East Coast of the US is very dependent on nuclear electricity. Also the Midwest.
The availability of additional electricity from nuclear was very helpful.
Perhaps refining would be a better word than cannibalizing. Refining also made more money for oil companies.
German Defense Minister Boris Pistorius said that he and his wife had stockpiled water, food, and other essentials in advance in case of a possible war or emergency.
https://ua.news/en/world/pistorius-ziznavsia-shcho-trimaie-vdoma-zapasi-na-vipadok-viini
(Spiegel interview supposedly)
–
German emergency advice says 10 days of food/water supplies..
(govs link inside) https://www.reddit.com/r/germany/comments/1p16dli/german_emergency_advice_says_10_days_of_foodwater/
–
Germans told to stockpile food and water for civil defence
22. 8. 2016 · Interior Minister Thomas de Maiziere told a group of schoolchildren that Germany must be prepared to react if water or food reserves were …
http://www.bbc.com › news › world-europe-37155060
also from that year:
“For the first time since the Cold War, the German Government is asking citizens to start storing food and drink in case of a national emergency. “
We also saw something a while back from the government of France, recommending the stockpiling of emergency food and other essentials.
This Asian (ethnic Chinese?) guy was just in China and said there’s a huge economic downturn. This is a tangent on his part, he doesn’t seem like a paid schill / disinfo agent. Found it interesting: he says all the foreign business folks are gone.
https://youtu.be/escPlO4P0LA?t=685
This Asian speaker seems to fit in with a whole lot of other videos we have seen in recent months about China (or perhaps even longer). The government has been greatly subsidizing the cost of electric vehicles, but even with that, there aren’t very many being sold within China. We know that the real estate bubble there continues to crash. I can believe that other countries are pulling investments out of China now with investments there not doing well. Even wind and solar have been struggling with low profitability. And US tariffs have been hurting China by reducing exports and keeping the prices of exports lower than they might otherwise be..
Immediate consequence of the Hand’s sanctioned-based 8 year backdoor energy bailouts of the broke ass albatrosses of industrial civilization coming to an end. There’s your controversially low oil prices right there. ‘Uncertainty’ about the adequacy of the 60day sanctions relief as the Hand’s elaborate Kabuki theater political cover for the plandemic 2.0 BNS psyop. The gentrified, overcomplex little bitch that capitalism is is rapidly and very publicly proving to not be up to the task.
Welcome to the DA.
Thanks. Looks legit. I always wonder with the China is shutting down stories. It’s across the board now.
Supply chains break at first link
Good point. China is especially dependent on fossil fuels.
SOH conflict main objective is to induce inflation to support oil, economy, cut the debt but it’s not enough?
https://thebull.com.au/news/oil-forecast-is-a-multi-million-barrel-surplus-approaching-in-2027/
robust US crude exports providing flexible barrels to global markets, and unexpectedly low Chinese import volumes as the world’s largest crude buyer grapples with slower economic growth and accelerating electric vehicle adoption.
China had to bail out the world . It did so during the 2008 financial crisis also . It was/is TINA . China would have collapsed . Tainter has pointed out that nations collapse because their trade partners collapsed . We are ” Bozos on the same bus ” .
“Exports of goods and services account for approximately 20% of China’s total Gross Domestic Product (GDP). While this share indicates a more internally driven market than many smaller European countries, manufacturing and trade remain fundamental drivers, with industrial output representing nearly 37% of China’s GDP .”
It is 37% that counts .
The labor force in the US has shrank by 1.1 million since Jan. 2026. So many people have left the work force the unemployment rate actually went down from 4.3 to 4.2%. If you add back the people that aren’t counted since Jan. 2026 the real unemployment rate is 6.1% BTW.
The only reason the US has positive GDP numbers is because of AI CAPEX. Which clearly isn’t enough to create jobs to keep these 1.1 million people employed.
Nothing inflationary about an oil price shock. Not that any of the Central Banks matter but they will be cutting rates back to zero as this plays out.
Household credit in China has been in contraction. The reason interest rates are so low in China is because lack of demand for credit.
China, Japan, and Switzerland all have very low interest rates. Low interest rates aren’t stimulus. They are just reality in a low growth environment.
1.1 million people dropping out of the work force is demand destruction. Demand destruction with a negative feedback loop.
Right!
True, but even under over-all leading deflationary wave you get inflationary (“partial”)undercurrents in various segments of the economy ( and vice versa ).
Could be. The rising costs of i-phones, for example, because of rising chip costs.
I agree. I think the unemployment rate in the IT-computer programming sector is particularly understated because quite a few of these folks were contract “employees.” They are aren’t eligible for unemployment insurance. I expect that they are particularly undercounted.
One thing I thought about including in my latest post, but didn’t have space to include, was the strange timing of the Iran attack. It came right after the Supreme Court struck down the tariffs, and leaders figured out that big repayments would be needed.
Something needed to be done to try to offset the loss of this protective “moat” of tariffs that the US had tried to put around the US economy. The choice that was easily available was to help Israel with its desire to attack Iran.
This is a super speculative question. Besides a war between the powerful countries, could there be a war within each of these countries between the nationalists and transnationalists?
Boomers fell for this. https://www.youtube.com/watch?v=O9h2EBdCu6I
If they went to college, their ability to think critically about the service economy was diminished. It’s not their fault, though. They grew up being told that services was the future. Outsourcing began as soon as the world rebuilt the damage from World War II. Outsourcing began as as early as the 1960s, in some cases.
Correctamundo, JAP scooters and such in the late 1950s – early 1960s followed by carz, similarly DE VW carz sipping less gas followed by some ~lux brands ala BMW, .. , then in 1970s HK electronics, toyz, and small appliances.., then TW early mini computers, ..
Also, the general sub-trend of US manuf. outsourced to Mexico.., textiles even more southbound LatAm ( apart from Asian inflows )..
Video is called “Gary Hoover Rise of the Service Economy”
Video shows percentage of service workers was surprisingly high, even 100 years ago.
I suppose a person could argue that if women stayed at home, doing child care they were, in some sense, unpaid service workers.
Hoover argues that the system changed [I would say, due to the use of fossil fuels] , so that not so that only a tiny fraction of the workforce now needs to work in agriculture. The rest of the economy could grow up around the smaller agricultural use.
There are a few concerns I have:
1. Our bodies are designed to eat minimally processed food–cooking, primarily. If eaten this way, there is much less tendency toward overweight and overeating.
2. Our bodies are designed for exercise. If we are trapped behind a desk doing a service job, we are unlikely to get this exercise.
3. All of the service industries that built up work on maximizing their own revenue. Their concern about the people they serve is minimal. In the US, restaurants serve oversized portions. The fiber in food is removed in processing and replaced with over-processed materials. The medical community has a strong incentive to over-diagnose and over-treat symptoms that will never amount to anything (and for which the treatments are as harmful as the original disease).
4. All of the changes have led to a need for huge amounts of debt. This debt cannot be repaid with interest unless the economy is growing.
5. It looks like we are on the edge of losing much of the fossil fuels. It is not clear that we can keep the economy growing. It is not clear that the debt bubble can stay inflated. The service economy looks terribly vulnerable if the economy needs to be reorganized.
Yes, energy for farming but also automation. For all economic activities energy plus automation (machines no AI). There is no need for growth if the available energy and automation is sufficient to feed, cloth, house the people. It is no horror if a human is born at a certain level of wealth and lives and dies at that same level. Just as long as it is a comfortable level.
Yes transitioning from a debt economy to a pay as you go economy will be difficult maybe even violent as the debt owners will fight to the end to remain rich on the backs of the humanity. Currently the debt owners control the governments so the possibility of transition to a Jesus economy is zero for the foreseeable future.
The debt owners are disproportionately included in the decision makers of the world.
But if the system starts to contract, there is a huge problem:
1. The debt starts to collapse, or
2. Some scheme can perhaps be cooked up, using Stablecoin or something similar, to add more debt to kick the problem down the road a bit farther.
A Substack post I saw said that based on astrology, some kind of turning point around July 19 might be reached. Whatever the turning point really is, it can’t be very far way.
The main issue with the services available in our service-based economy is that they are unaffordable to many people.
Borrowing money is a necessity for consumption of many services. Borrowing money is now expensive. The economists and c-suits don’t see the issue.
The interest paid on borrowed money helps to funnel money to the already wealth. People don’t realize this.
People who grew up in the Great Depression were counseled by their parents to stay away from debt. People today don’t realize how important that is. Maybe gambling in the stock market with “levered” investments can work for a while, but eventually it will fail.
“.Their concern about the people they serve is minimal. ”
This has been a long-running critique of many available services.
The quality of services seems to be of no interest to rulers or their advisers, either.
This is what happens when you run out of diesel .
” Excavators and cranes ground to a halt at some rescue sites in Venezuela as fuel shortages hampered recovery efforts after last week’s earthquake, leaving crews unable to clear debris in some of the hardest-hit areas of La Guaira state.
“There is no fuel, the machines are stopped since yesterday,” said Ariana Requena, who is trying to find her mother and brother in the rubble of Roca Park, a residential building that collapsed in La Guaira. Her grandparents’ bodies were recovered earlier this week. ”
https://archive.md/BITIX#selection-1545.0-1549.266
I am afraid this is not a surprise. There have been long electricity outages in the past also.
Oil not affordable at recent prices? Recession we have been missing?? Confusion on sanctions?
https://www.zerohedge.com/markets/iran-runs-big-problem-no-buyers-its-oil-full-tankers-pile-china
Iran Runs Into Big Problem: No Buyers For Its Oil, As Full Tankers Pile Up Off China
Iran was euphoric when as part of the Trump MOU, it got permission to flood the world with its oil after Trump effectively eliminate sanctions that had been in place for 40 years. However, it has quickly run into another, potentially far bigger problem: as the armada of Iranian oil tankers exits the Persian Gulf, it is now struggling to find buyers before the expiry of a 60-day window granted by Washington,
According to Vortexa data and Bloomberg calculations, there are more than 58 million barrels of Iranian crude and condensate was on-the-water as of July 1, yet more than 90% has no clear destination. The vessels are either indicating “for orders” or Singapore as their next port of call, a sign they may conduct ship-to-ship transfers in the Malacca Strait. . .
And here is the culprit : demand from Chinese independent refiners – Iran’s main customers prior to the conflict – has been muted as the sector’s run rates crash to a nine-year low. China’s state-owned refiners have also stayed on the sidelines, citing concerns over the ability of banks to finance any deals.
Translation: as we suspected a month ago, China’s economy is in far worse shape than telegraphed, and as a result it does not need Iranian oil (what oil it does need it just sources from its massive strategic reserves). . .
Indian Oil Minister Hardeep Puri met his Iranian counterpart in New Delhi last week, but stopped short of committing to imports. The country’s state-run processors are avoiding the Iranian oil for now, because they’ve already secured Russian crude supplies through at least the end of August. They are also still seeking clarity from Washington over US-denominated payments, they added. . .
Still, Asian interest in Iranian oil could quickly emerge if the price is right.
I’ve already read several news reports about the lack of interest in Iranian oil on this blog and other media outlets, and there are… loose ends in the news.
If China has reduced its imports by more than 5 million barrels per day (mbd) for over 100 days, and previously needed at least 4 mbd of those 5, why would they prefer to keep drawing on reserves rather than buying crude? Because they must have a hole of more than 400 million barrels in their reserves. The refineries may be full, but the reserves are not.
Another possibility is that it would be cheaper for China to use Iranian tankers as floating storage facilities instead of pumping oil into the country, while waiting to make room for the new shipments. We saw something similar throughout March, with a phantom fleet loaded and beached, which was then activated to unload in China.
Copy/paste from Quark comments
House of Mirrors
The agenda to print money to pump tech stocks and short oil as an economic stimulus continues. It’s a big club and you ain’t in it.
Mike Shellman
Ouch!
I would guess that for example Japan would be delighted to accept that oil. Where am I wrong?
drb , It is the uncertainty . It is not only Japan but everyone else including India .
https://www.marketscreener.com/news/iran-exploring-oil-sales-to-japan-buyers-seek-longer-sanctions-waiver-sources-ce7f5edad981f625
https://www.spglobal.com/energy/en/news-research/latest-news/crude-oil/061826-once-a-favorite-among-refiners-india-rethinks-oil-sourcing-strategy-from-iran
The Orangutan cannot be trusted .
Yes, there is fear they will be punished. The Orang is a mean drunk.
More datacenter problems. This is a different data center than two days ago:
https://www.zerohedge.com/technology/worlds-largest-data-center-campus-verge-collapse-after-blackstone-unexpectedly-pulls-out
World’s Largest Data Center Project On Verge Of Collapse After Blackstone Unexpectedly Pulls Out
The digital ink is barely dry on its Virginia data center sales, and we learn that Blackstone’s QTS (QTS Realty Trust) is again quietly fading its AI exposure by walking away from plans to build its portion (which at this point is the only portion left after its partner already pulled out days ago) of a 2,100-acre data center campus in Virginia – also known as Prince William Digital Gateway which would house as many as 37 data-center buildings – handing a win to residents who fought for years to topple the project.
The data center developer had planned to transform more than 800 acres in Northern Virginia’s Prince William County, a project that would have spanned 22 million square feet, making it the largest data center campus in the world. Located on the edge of an historic Civil War battlefield and on what used to be land protected from development, the project ignited strong pushback from homeowners and has been stalled by lawsuits.
. . . Already, Brookfield-backed Compass Datacenters, which was supposed to build on more than 800 acres at the site, had pulled out in May.
The U-turns by both firms, Bloomberg writes, amount to one of the most dramatic retreats by developers from a data center project.
EIA has posted a figure for world crude oil production for last March (76.395 Mb/d) — this is 11.9% below their next-highest monthly figure (86.715 Mb/d, for last February).
Is world “peak oil” past? http://oil-price.net/ https://davecoop.net/seneca
https://www.eia.gov/international/data/world/petroleum-and-other-liquids/monthly-petroleum-and-other-liquids-production?pd=5&p=0000000000000000000000000000000000vg&u=0&f=M&v=mapbubble&a=-&i=none&vo=value&t=C&g=00000000000000000000000000000000000000000000000001&l=249-ruvvvvvfvtvnvv1vrvvvvfvvvvvvfvvvou20evvvvvvvvvvnvvvs0008&s=94694400000&e=1772323200000
Correction: last February was their HIGHEST monthly figure.
Clearly, data for March is after the Iran war started. The difference between February at 86.715 million bpd and 76.395 million bpd = 10.320 million bpd would give one estimate of the oil production lost, but it would probably be better to look at the details a bit more.
Data by country will tell how much Middle East oil seems to be missing. If Russian oil is also missing, we can also figure this out.
As part of this report:
https://www.zerohedge.com/the-market-ear/ai-memory-trade-unraveling
Zerohedge is reporting:
China’s memory moment
Apple is reportedly considering Chinese memory suppliers for products sold domestically. The immediate benefit is obvious: lower costs and greater supply flexibility. The bigger story is what it signals. If Apple embraces Chinese memory suppliers, it does more than lower costs; it validates domestic competitors and could gradually reshape competitive dynamics in the world’s largest electronics market.
But this will not go over well with the market, if true.
A key phrase: “An underlying issue is that the price of oil extraction has tended to rise faster than inflation.” If you replace the world “inflation” with “what the market will bear”, you have the definition of economic peak oil. One of the predicted indicators of economic peak oil is wide fluctuations, also for the reasons you cite: a low oil price is a disincentive for more extraction, a high oil price is a disincentive for more consumption. We’re seeing both.
Good point:
“If you replace the world “inflation” with “what the market will bear”, you have the definition of economic peak oil.”
You are right on the second part of what you write, also.
Well, it is well to remember the early days of TheOilDrum blog where Gail was ‘just another’ poster… and I, all bright and bushy-tailed, was reading her posts then —she caught my attention with her suggestion that oil prices may fail to rise as a response to increasing demand. I figured I’d stick around and find out.
” if water doesn’t flow blood will”
India and Pakistan two nuclear armed nations have coexistence issues.
Not enough chairs.
Solved in the usual way?
https://m.youtube.com/watch?v=6L6dClwjuQs&pp=ugUEEgJlbg%3D%3D
During the growth phase of agricultural civilization might makes right. MPP. During the collapse phase difficult compromise makes MPP, especially between nuclear powers.
It is hard to imagine two countries, as close geographically as India and Pakistan, to use nuclear weapons. There is too much that can go wrong.
A nuclear armed adversary on your border is always problematic. Probably either India or Pakistan could execute a successful nuclear decapitation strike. Their warheads are small and total warheads about 340. It would be kind of a tactical nuke ++ shootout and very one sided for whoever got on the trigger first. Not as bad as you might think. Probably not a civilization ending event. This scenario is weighted for entertainment so their is actually a exchange. There simply wouldn’t be much of a exchange with distances involved. Small distances between nuclear adversaries encourage possibility of a event because the probability of success of a capitulation strike and the do on to others before they doo doo on you principle. Realistically maybe 20 million dead on one side 5 million dead on the other. Islamabad Delhi and Mumbai gone. Fallout much much smaller than if the real players were tossing high yield devices about.
https://youtu.be/xpAOM-qUGdU?si=XEuS6uEFvvMVWsEs
Do India and Pakistan have fusion bombs or just “small” fission bombs?
Nothing will happen between India and Pakistan . China just warned India ” if you cut off downstream water just to remind you that you are downstream to China ” . India cannot take on China –India is working on a back channel to open the water . No , they don’t have fusion bombs .
https://www.youtube.com/shorts/Vf-8UVBKDBQ
Not same degree of supply domination. Majority of Indus water enters after China. Still I agree with you. India doesn’t have the ability to cut off the water. Lake Punjab is not going to fly.
Your comment reveals a major crack in the BRICs alliance. Putin tried to gloss over the China India rivalry. He has other things to do now.
India not pleased with China Pakistan alliance. Now it is demonstrated in a non economic realm. These threats may not have substance but they do reveal real animosity. India tossing the Indus water Treaty reveals a lot of things. Tossing treatys always is destabilizing. Laying exclusive claim to previously shared critical resources is always destabilizing.China stepping up for Pakistan can go either way longer term. India may feel obligated to show China they are not dominated. Surrounding can bring out fight responses or flee responses. If China becomes the economic player in the gulf countries via Pakistan India is indeed nicely surrounded their two rivals teamed and in on the ground floor. Brics would be nothing more than a facade. Because it always was a facade. BRICs was always China.
China stepping in for Pakistan may stabilize short term. Longer term it may be destabilizing.
Low self esteem is not always crippling. Sometimes it creates interesting responses.
Great new (thesis-data updating) article by Tim Morgan:
https://surplusenergyeconomics.wordpress.com/2026/07/01/327-surplus-energy-economics/
In my first derived simplistic reaction ( not claiming author’s per se ) it seems as the ” prosperity knee ” threshold as in personally felt very rapid profound change to worsening trends could occur around [ 2035-40..] boundary. And that dependent on condition there are no profound colliding, intervening events along the route way before to such idealized curve of time ( Hormuz – anybody hah ). Specifically, as some region/s of the world could go down way sooner, hence dragging the rest into the expedient ( overall ) downdraft as well..
Obviously, these are world aggregates; so for example the current statistics and self identified dis-grunt (on the ground reality) of large part of US workforce already found themselves on the ever sloping curve to the right (Fig. 4,5) .. experiencing ~collapse of prosperity already.. And the discretionary affordability cliff ahead around ~2030-35-40 is absolutely massive free-fall then..
My note/speculation: hence, we can’t discount the possibility the US acted pre-emptively with that Hormuz gamble for that very reason.. It would also explain the EU near-suicide policy gamble tendencies as of lately ..
–
In the last chapter 4.11 and graph (Fig.8c), also interesting fact: the leverage of GDP vs broad (all) fin assets is roughly 1:8 ! But my addition, it could be slightly worse because both GDP and fin world shenanigans. In any case 1:5 – 1:10 overexposure seems as realistic boundary there ..
If Reante’s ~natsoc~ scenario answers to that crash, the new structure would have to be almost all synthetic debt instrument free, which seems impossible from our today’s vantage point, but similar grand civ-shocks ( and corresponding answers ) happened already throughout larger history span ( K-years) few times already..
Yes I expect Phase 2 of the DA to qualify as fast collapse by anyone’s standards. Nature of the beast. Even the Hand can’t do anything about fast collapse. The harder the civilization comes the harder it falls. All it hopes to do is stave off chaotic collapse for as long as possible.
Also interesting this “~apogee forcing” meant in figurative sense of that curve at graph (Fig.5d), placed there ( somehow / someone ) during-onwards 2019 – C19 exercise, very doubtful such timing-fit on that exact spot-segment of curve being just randomly-happen stance..
In short, revealed testing and (scheming)bracing up for civ-altering impact.
Quotes from the post. I put a couple of important points in bold. The post also talks more about the current faults of the thinking of today’s economists. Clearly, Tim Morgan thinks that market values will keep rising, until the financial system collapses completely.
Today, through the application of a series of fundamental precepts, we can know, and at very high levels of confidence, that the economy has stopped expanding, and is heading into contraction.
. . .
What we also know is that this process of economic inflexion will be accompanied by crises, which might be financial, social, geopolitical or, in all probability, a combination of all three. . .We need to be clear that the ending and reversal of growth can only end in crisis.
. . .
Governments don’t have “answers” to this problem, because no such answers exist within current political parameters. . .International relations, meanwhile, have been degenerating into intensifying competition for scarce and dwindling resources.
. . .
a successor to fossil fuels won’t be found in any sudden moment of ‘technology saves the day’. . . The lessons of this history are that energy evolution happens very gradually, and that each progression has required the foundational technologies of its predecessor.
. . .
global average prosperity per capita grew by about 2.7% annually in the 1950s, rising to 3.0% in the 1960s. . . And these, of course, were the years when then-cheap oil – and, latterly, natural gas as well – were taking over energy leadership from coal.
. . .
the key point to be taken from this sequence is the essential energy causation of economic trends.
. . .
The problem with renewables is that, far from providing a qualitative advance on fossil fuel energy, they cannot be detached from it, and do not boast meaningful superiorities over it.
. . .
ore grades have declined more quickly than mining methods have improved, and that agricultural land has degraded more rapidly than farming techniques have progressed.
. . .
With due deference to Benjamin Franklin, more can now “be said to be certain” than mortality and taxation. The first thing we know, and are learning in real time, is that ‘infinite, exponential growth on a finite planet’ is indeed the preserve of madmen and economists.
The other is that this inevitability will be denied, up to, and even beyond, its point of demonstration.
. . .
economic growth alone enables some to prosper without a corresponding detriment to others.
. . .
Since the prices of assets tend move inversely to the cost of capital, the result has been the inflation of an “everything bubble” across most asset classes. This manipulation of the relationship between assets and incomes has been a major driver of widening inequalities.
It’s very important that we remember, at this point, that assets only ever command paper values, and can never be monetised in the aggregate. The only possible buyers for the entirety of the stock market, or for the whole of a nation’s housing stock, are the same people to whom these already belong.
Accordingly, it might be contended that those who advocate a political rebalancing of inequalities of wealth and income might, in reality, need to do no more than wait for the collapse, not just of most paper wealth, but also, very possibly, of fiat money itself.
Even the wealthiest are only ever one market crash, or one currency collapse, away from losing almost everything.
. . .
The excessive faith vested in monetary innovation and the wonders of technology has at least served the purpose of telling us where to look for failure.
. . .
Our understanding of finance, when benchmarked to the material, should inform us that the moment of monetary failure will coincide with the attainment of absolute peak valuation
Or, as Ibn Khaldun put it in the 14th century:
‘The candle flame burns brightest just before it goes out’.
Most red pilled movie quote.
Most Red Pilled song ever made.
Yup Lennon was killed for playing pied piper and trying to lead the kids off the reservation just like Marley and Tupac were.
That was awesome man thanks. Fun trippy comments section too. The guy’s wife even dropping in. Miles Mathis fanclub also dropping in saying that Miles proved it’s actually Lennon lol. Good times.
Thank you!
I didn’t know the full version of Let Him Be was available online.
I’ll say one thing.This guy looks like a John Lennon and sounds like a John Lennon a lot more than the biopic actors who played Freddie Mercury and Michael Jackson resembled the originals they played. And this movie was pre-AI.
Although Michael’s nephew made a passable Michael and there is a definite basic resemblance.
The song is very repetitive. It has no “hook”.
vaxxers have 1-3 years left. tops
The way things are going mobbie, that looks like you can include us all in that group…good luck feeding the human hoard with the chaos in the mix ..
Hungry anger and destitute folks tend to act out…right, Kulmmie?
That’s a very provocative and also an alarmist statement that will only make people anxious. If the MSM started broadcasting it as an official prediction, hearing or reading it would probably finish off thousands of people early. The MSM are the West’s modern equivalent of witch doctors and voodoo practitioners. Their scare stories are on a par with giving people the evil eye.
Having said that, US mortality, especially amount younger age groups, is much higher than any other Western country.
The food we eat in US is particularly bad. Young people have grown up on MacDonald’s hamburgers and french fries, with ketchup for their vegetable. Cookies are monstrously sized.
At least some older folks remember the foods they grew up with. They cook from scratch at home. Some even have gardens.
Well, to be fair, there are also other ff chains avail., providing (tiny) bit of ~veg salad into the sandwiches and so on.. ; besides there should be cafeterias/school(uni) kitchens at least at some places still in function for the youngsters.
But the thrust of the argument is likely correct, I recall many decades ago, my land-lady in the US, was shocked-appalled me cooking ( out of habit ) and tight budget almost daily ( obviously meant easy-quick meals ).
Now from Italian friends I know that even this particular notable sub-culture of theirs with deep traditional roots keeping for 100+ yrs somewhat degraded/degenerated inside US recently. So, many still cook at home, but it’s way simplified and sporadic vs say ~1970-80s situation ( then more multigen households )..
Obviously, this phenomenon took place to some extent at all continents, and across many other cultures as times went by..
Deutche Bank has an interesting article (optimistic) about AI. In Figure 4 of the article it points out that on one market where AI tokens are bought and sold (OpenRouter), Chinese tokens now outsell those of the US.
https://www.dbresearch.com/PROD/IE-PROD/PDFVIEWER.calias?pdfViewerPdfUrl=PROD0000000000632122&rwnode=REPORT
Always a great read! Thanks! On the petrodollar issue. It was clever because it allowed U.S. banks (and U.S. industrial interests) to make a profit of just about every barrel of oil. Iran threatened that monopoly soon after it began, in 1979. The U.S. has never let it rest–trying to get Iran back in line. Now, with that idiotic attack, we’ve cut off our nose to spite our face. Sorry to jump around, but the cart is now leading the horse. Trump and his cronies believe dollars run the world and they’re extorting money wherever they can. I believe we both agree that oil creates dollars not the other way around?
Trump’s regime still views US military power as it was post WWII. that 3/4 of our re-fuelers and B-52s were flying during the Vietnam war doesn’t give them pause. That the word pathetic doesn’t begin to describe our shipbuilding capacity. That China’s engineering and manufacturing base is now way ahead.
A reason why the U.S. economy might not be able to self-adjust oil prices is that much of the world, backed by China, is working to divorce oil from the petrodollar which will impact the “reserve” currency status and and ratchet up inflationary pressure.
Put another way, the U.S. has always had this delusion that the Fed can control inflation. Those days, I believe, are over. The U.S. will have to adjust to global energy markets which are increasingly anti-dollar. I think you’ve pointed this out, that we’re walking into a hyperinflation trap. Again, loved your piece.
Glad you loved my piece!
I agree that oil creates dollars rather than dollars creating oil.
The US has tried to manipulate inflation rates for years. I was astounded when I saw the fall in interest rates between 1981 and 2021. But rising interest rates has the potential to bring about calamity, as does falling levels of debt.
I also saw oil production from Iran drop off the cliff when sanctions were imposed in 1979. This is a chart I made today showing Iran’s oil production from 1965 to 2025. I would be very unhappy about the situation, if I were Iran.
https://ourfiniteworld.com/wp-content/uploads/2026/07/Iran-Oil-Production-through-2025.png
I can only assume that the source of calamity would come from non-productive members of society. In a period of calamity, non productive members of society would realize that without “passive income” from the financial sector, they would have to do something productive to survive.
But that’s me and my limited perspective. You may have some other, more accurate source in mind.