THE IMPACT OF OIL SHORTAGES BY CONTINENT

 Roger Boyd outlines the impact of restrictions on oil supplies. Despite Trumps bravado - the USA is much more vulnerable than Trump says.

'As the last of the pre-war Gulf deliveries have ended, the draw on the US reserves of oil and especially oil products will intensify. At the same time, the US has a relatively fixed oil refining capacity in the short and medium term, so as regions such as Europe and Asia become more and more desperate for oil products they may bid away supply from domestic US consumers. US jet fuel supplies are already near critical levels (with the Us having a limited jet fuel import dependency), diesel stocks fell by 4.5 mb in the most recent week to 103.6 mb, and gasoline stocks fell by 6.1 mb to 222 mb (with a critical level which will drive price escalation seen as 210 mb). The result may be rapidly escalating gasoline, diesel and jet fuel prices, and possible shortages, during the peak US summer domestic travel months; political poison for the US administration.

Made even worse if the US attacks Iran again and the Saudi Red Sea exports are blocked. At what point will the US limit oil product exports to protect its own economy from the very oil supply crisis it created by attacking Iran? While also sanctioning Russian and Iranian oil exports, and Chinese oil product exports? The oil share of US energy use is about 36%, even with an economy that is significantly de-industrialized; with a manufacturing share of GDP of only 9.4%. The US is a major importer of energy that is embedded in its imports from Mexico, China, Japan, South Korea and Southeast Asia. Mexico is self-sufficient in oil, and China is heavily cushioned, so the biggest import risks will be from Japan, South Korea and Southeast Asia; leading to a possible blowback from sanctioning Chinese oil product exports and general oil supply shortfalls for the sources of its imports.

The current average US gasoline price is US$4.45 per gallon, over US$6 per gallon in California. What happens if that price hits US$10 or if there are even gasoline or diesel shortages? The US government will act before such outcomes become a reality. As noted above, the problem is that the US has significant exposure to embedded oil imports and the combination of exclusions on the use of Russian, Iranian and Chinese oil and oil products together with restrictions on US oil product exports could lead to significant import shortages and import price escalation.

The geopolitical implications of the US protecting itself, while enriching Russia in parallel to very limited impacts upon China, from the consequences of its own actions may have extremely severe geopolitical consequences. Not just with respect to its own vassals, but also with respect to other nations such as those of ASEAN.





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