The energy cushion is disappearing. This winter the danger may no longer be only what fuel costs — but whether enough fuel is available where it is needed.
RATIONING!
A Nick Guarino Opinion Piece
1.The Warning
Saudi Aramco CEO Amin Nasser has warned that global oil inventories have become “scarily thin” and that emergency releases can buy time but cannot repair the underlying imbalance. His warning that depleted inventories could take as long as two years to rebuild is the foundation of this editorial: emergency stocks are a bridge, not new production.
2.Five Data Points the Market Cannot Ignore
1. Emergency reserves are being consumed.
The G7 and partners have discussed making up to 100 million barrels of emergency crude and diesel available over roughly four months. Some volumes overlap with previously pledged emergency releases. Even the full headline amount averages only about 830,000 barrels per day over four months. A sick joke
2. Diesel and heating oil are the pressure point.
Crude in storage is not diesel in a truck or heating oil in a home. Refining capacity, middle-distillate inventories and transportation determine whether crude becomes usable fuel. The current squeeze in refined products is therefore more important to households and transportation than the crude headline alone.
3. LNG is not an easy escape valve.
Supplied Bloomberg/Kpler reporting says LNG flows through Hormuz remain more than 75% below prewar levels despite a rebound. Before the war, roughly three LNG cargoes per day regularly exited the Strait; September was estimated at 21 cargoes for the entire month.
4. Winter changes the equation.
A colder-than-normal winter would increase heating demand while diesel, heating oil and LNG markets are already strained. Our forecast is not that the world literally exhausts every gallon, but that regional shortages could become severe enough to produce rationing and forced conservation measures.
5. Rebuilding the cushion will take years.
Even if Hormuz fully reopens, the inventories already consumed still have to be replaced while the world continues meeting daily demand. Nasser’s two-year warning makes the duration of the problem as important as the immediate shortage.
3.HERE’S HOW BIG OIL IS SCREWING YOU
The story they don’t want you to know
This is Nick Guarino once again telling you the story Wall Street, Big oil and politicans are hiseing from you. The underlying economic point is straightforward: stressed overseas markets will place a much higher value on exportable U.S. energy than the domestic benchmark price.
Using the market figures discussed for this report, U.S. Henry Hub natural gas was roughly $3 per MMBtu while stressed European gas was around $25 per MMBtu. A rough all-in LNG delivery cost in the neighborhood of $8–$10 per MMBtu can leave an indicative gross arbitrage opportunity of roughly $15–$17 per MMBtu in an unusually stressed $25 European market. The exact profit captured by any company depends on contracts, hedges, liquefaction fees, shipping, ownership and other costs. But as you can see the profits are hugh to take natural case from the US market and ship it to the hungry markets of Europe and Asia.
In my opinion producers are deliberately withholding gas from Americans. International demand acts like an economic magnet on every incremental molecule of U.S. gas capable of reaching an LNG export terminal. At the margin, American consumers increasingly compete with European and Asian buyers.
The same international pull matters in refined products. When diesel and heating oil command exceptional premiums overseas, export economics compete with domestic demand. Every refiner that can chooses foreign customers over Americans; it is that globally traded fuels move toward markets willing and able to pay the highest netback, subject to contracts, logistics and regulation. They are pushing things to limit and weell do so till they get caught. Whistle blower anyone?
4.Diesel, Heating Oil and Natural Gas: Three Pressure Points
Diesel powers trucking, farming, construction and industry. Heating oil competes for closely related middle-distillate refinery output. Natural gas increasingly participates in a global LNG market. A simultaneous squeeze across all three leaves households, transportation and industry with fewer easy substitutes.
Our editorial forecast is as physical shortages become severe enough this winter, governments could turn to rationing or conservation measures rather than allow critical systems to fail. That could mean priority allocations for essential users and appeals or mandates to reduce heating demand. A specific 60°F thermostat rule has not been announced; it is an illustration of the kind of conservation policy that could become politically conceivable in an extreme shortage. And severe penatlies will be enacted for “overusers.”
5.The Traditional Fallback Is Not Universally Available
Wood heated homes even caves and cooked food for millions of years. The liberal commie lefties are doing all in their (wood is the ultimate renewable fuel is no longer a universal fallback. Some U.S. jurisdictions restrict wood burning sighting air-quality issues, regulate the installation of wood-burning appliances and our prohibiting the use of existing fireplaces. Shit the greenewinnies are prohibition fireplaces and wood burning stoves in new construction. New York City has not generally banned fireplaces, but its building policies increasingly limit onsite fossil-fuel combustio. The broader point is that modern households cannot always switch freely among wood, oil, gas and electricity when one fuel becomes scarce. It ain’t no accident!
6.Europe’s Shortage Will Reach Back Into America
U.S. LNG terminals draw natural gas from the domestic pipeline system, liquefy it at about −260°F (−162°C), and load it onto ships. And sell it to overseas buyers who pay many multiples of the U.S. benchmark, export demand will drive higher U.S. gas prices for consumers and tighter regional balances. America possess enormous underground gas resources and still experience sky high prices and infrastructure constraints at the consumer level.
The point is simple: Europe’s energy shortage does stay in Europe. Europe and Asia buyers bid for U.S. LNG, and that competition transmits global scarcity back into the American market. And raises prices for U.S. Consumers.
7.Our Forecast: Rationing, Global Supply Shortages
Our prediction is not that every tank runs dry. It is that the remaining cushion becomes thin enough that governments and distributors will have to decide who gets fuel first as they bid agaist each other rasing prices to the moon. Diesel, gasoline, heating oil and natural gas would not necessarily be rationed everywhere or simultaneously. But if winter is colder than normal and the present disruptions persist, rationing and aggressive conservation become risks you need to take seriously.
Imagine heating-oil distributors allocating deliveries, truckers and farmers competing for middle distillates, utilities facing exceptional gas demand, and governments preserving part of their strategic inventories for national-security needs. At that point price is no longer the only issue. Availability is the issue.
BURNING YOUR FURNITURE TO HEAT YOUR HOME
The phrase is intentionally stark imagery, not a prediction that families will literally be forced to burn furniture. But at the prices they are about to pay burning their furniture to heat may be cheaper. After years of assuming abundant interchangeable energy, and the greenieewinnes sucessful in shuting down drilling and refining consumers may discover that their is a rice to pay for climate change stupidity. A very very high price indeed. And the alternatives they expected are constrained at the same time.
8.Sources / Source Material
Bloomberg — G7 and partners: planned release of up to 100 million barrels of emergency oil and diesel stocks; supplied in this conversation.
Bloomberg / Energy Intelligence Forum — Saudi Aramco CEO Amin Nasser: inventories described as “scarily thin”; emergency releases buy time; replenishment could take up to two years; supplied in this conversation.
Bloomberg and Kpler tanker-traffic data — LNG traffic through Hormuz rebounding but remaining more than 75% below prewar levels; supplied in this conversation.
Reuters shipping-data reporting referenced in the supplied LNG article — September LNG shipments through Hormuz remained well below prewar levels.
U.S. Energy Information Administration — U.S. LNG exports, Henry Hub pricing dynamics, and the relationship between export demand and domestic natural-gas markets.
U.S. EPA / state and local air-quality agencies — wood-burning appliance standards and local no-burn restrictions.
New York City building rules — restrictions on onsite fossil-fuel combustion in new construction.
Editorial disclosure: Forward-looking statements concerning shortages, rationing, conservation measures and winter conditions are Nick Guarino’s opinion and risk assessment, not established forecasts or announced government policies.
— Nick Guarino