Commentary: Big Tent Ideas

The Real Global Oil Crisis Has Not Begun — Yet. Gird Your Loins

Unsplash/Ian Simmonds

Here’s what we know:

The world gets about 20% of its oil via the Strait of Hormuz. The Strait has been closed or nearly closed since the United States launched its war with Iran.

That launch date was Feb. 28th. Today is July 13th. We’re approaching five months of little to no oil getting through the Strait.

That’s so far resulted in 1+ billion fewer barrels in global circulation.

Here’s what we don’t seem to know:

We seem to be nowhere near an end to the war — or the Strait’s closure. And even when we are told we were near an end to the closure?

Like, say, with the irrational exuberance on rampant display with June 14th’s “Memorandum of Understanding?”

Like, say, with the ridiculous number of times President Donald Trump has lied about being close to a peace deal (38 times — and that’s just the tally prior to the “Memorandum of Understanding”).

Most of us have been pretending that once the Strait reopens — everything will simply and immediately snap back to normal. Heck, most of us still are pretending.

Far too many Americans have for months been taking victory laps about oil and gas prices. Most of which are predicated upon President Trump’s many lies and falsehoods. He’s lied so many times so as to seemingly manipulate the markets — so as to benefit his cronies? His own Department of Justice is (allegedly) investigating him.

None of Americans’ petroleum price optimism is predicated upon anything having to do with reality.

Reality: You cannot skip five months’ (and counting) worth of Strait oil and simply return to pre-war normal.

The Strait’s closure is a great and growing air bubble in the world’s oil supply line.  The bubble doesn’t just disappear when the war ends and the Strait reopens (whenever that will eventually be). It will still be there. And it will have to work its way through the system.

Thanks to many desperate moves by many countries all around the world? The bubble’s arrival has been delayed. But it cannot be permanently denied.

To stave off the bubble, countries have depleted their oil reserves to now dangerously low levels. Most are now — in insurance parlance — “flying naked” or nearly naked.  Meaning they have nothing left should any other problem arise.

Which means they all absolutely have to replenish their reserves. In a world already 1+ billion barrels short (and counting). Which means doing so will be very, very expensive.

And doing so will prolong the broader problem. Because every barrel put into a reserve — is a barrel not being put into circulation. Driving up prices further still.

All of the above reminds of two great quotes from minds of the past. Who were much more in tune with the real world than far too many of us are today.

“You can ignore reality, but you cannot ignore the consequences of ignoring reality.”

— Ayn Rand

“Eventually everybody sits down to a banquet of consequences.

— Robert Louis Stevenson

It’s time to lobster bib up. Reality’s meal is about to be delivered.

Seton Motley is a consultant and the founder and president of Less Government, an organization dedicated to, well, less government.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.