Michael Snyder has been warning that the next great crisis is just around the corner. Economic collapse, war, shortages and financial instability are familiar territory on his blog, and sensible readers have learned to distinguish the useful information he collects from the apocalyptic conclusions he sometimes draws from it. His latest warning about a global fuel crisis, however, deserves closer attention for a simple reason: this time some of the warnings are coming directly from the oil industry.

The Wall Street Journal reported this week that American oil executives who had warned for months about the consequences of the prolonged disruption to the Strait of Hormuz now believe the fuel crisis has arrived. Global commercial fuel stocks have been falling for more than six months, strategic reserves have been drawn down, and attacks on Saudi Arabia's crucial East-West pipeline have damaged one of the principal routes developed to bypass Hormuz. Analysts estimate that the pipeline disruption has stranded at least 2.5 million barrels of oil a day from an already tight global market.

Chevron chief executive Mike Wirth's assessment is particularly important. The various mechanisms used to protect consumers and markets from the initial disruption, including inventories, strategic reserves and alternative transport routes, have largely been used up. In other words, the buffers that prevented the original oil shock from immediately becoming a consumer fuel crisis are considerably weaker than they were when the conflict began.

That is the central point in Snyder's article, and it does not require an apocalyptic interpretation. The world has been able to tolerate serious disruption to Middle Eastern oil flows partly because inventories and alternative supply routes absorbed the shock. If those inventories continue declining while alternative routes are themselves attacked, the same level of disruption begins producing much larger consequences.

The effects are already visible in fuel prices. American diesel prices have reached record levels above $6 a gallon, while petrol has rebounded above $4. The importance of diesel extends far beyond motorists complaining at service stations. Diesel moves trucks, agricultural machinery, construction equipment and much of the machinery behind modern supply chains. Higher diesel prices therefore work their way through the cost of almost everything that must be grown, manufactured or transported.

The refining system is another source of concern. Reports indicate that global refining capacity has been severely constrained by the Middle Eastern conflict, Chinese export restrictions and attacks on Russian refining infrastructure. American refineries have consequently been operating at extremely high utilisation rates. That provides additional fuel in the short term, but machinery cannot indefinitely be operated near its limits without maintenance and the risk of unplanned shutdowns increasing.

The Saudi situation makes the problem considerably more serious. The East-West pipeline was important precisely because it allowed Saudi crude to reach the Red Sea without passing through the Strait of Hormuz. Once Hormuz became unreliable, that pipeline changed from an alternative route into a critical artery. Its disruption therefore demonstrates a basic weakness in the world's response to the crisis: an alternative route is useful only while the alternative itself remains secure. Current reporting indicates that Saudi exports face substantial constraints while the pipeline remains unavailable.

The vulnerability now extends beyond Hormuz. Houthi attacks and the deteriorating security situation around Yemen have increased the risks surrounding Red Sea shipping and Saudi infrastructure, while Ukrainian attacks continue to affect Russian refining capacity. The result is not one isolated chokepoint but several sources of disruption occurring simultaneously.

This is where the situation differs from the usual temporary oil-price spike. A short interruption can be covered by inventories. A longer interruption requires alternative production and transport. When inventories are depleted and alternative infrastructure is also disrupted, the system becomes increasingly dependent upon either restoring supply or reducing demand through higher prices.

The Strategic Petroleum Reserve provides the United States with another buffer, but it is not unlimited. Snyder is right to draw attention to the broader problem created when emergency reserves become an ordinary instrument for suppressing the consequences of prolonged supply disruption. A strategic reserve exists to buy time during an emergency. It cannot permanently replace missing production.

Europe faces an even more uncomfortable position because it is simultaneously exposed to international oil markets, Middle Eastern instability and continuing uncertainty over energy supplies. Any prolonged interruption of Saudi exports would therefore arrive at a particularly bad time as the Northern Hemisphere moves towards winter.

There is an Australian dimension as well. Australia may be geographically distant from the war, but it buys petroleum products in an international market. Rising crude and refined-product prices consequently feed into Australian petrol and diesel prices, freight costs and eventually food and other consumer prices. Australian reporting is already warning that the latest Middle Eastern escalation is likely to push domestic fuel costs higher. None of this establishes Snyder's larger prediction of an imminent financial meltdown. That part of his argument needs to be treated separately.

He points to rising US Treasury yields and argues that the combination of expensive energy, inflation and higher interest rates could trigger a much larger financial crisis. There is certainly an economic mechanism connecting these developments. An oil shock raises inflation, persistent inflation can keep interest rates higher, and higher rates increase pressure on governments, businesses and households carrying large debts. But a mechanism creating financial stress is not the same thing as a prediction that financial collapse is imminent.

Oil prices have moved above $100 a barrel amid the latest supply concerns, with Brent recently trading around $109 and West Texas Intermediate around $106. Markets are responding to the disruption of the Saudi pipeline, reduced flows through Hormuz and the possibility that the crisis will persist rather than disappear quickly.

There are nevertheless important reasons not to assume that today's crisis must become tomorrow's catastrophe. Supply routes can be repaired. Diplomatic agreements can reopen shipping. Producers outside the affected region can increase output over time. Consumers respond to high prices by reducing consumption. The United States has also made some progress in increasing shipping through Hormuz, although flows remain below their pre-conflict level.

The question is therefore one of duration. If Saudi infrastructure is repaired and oil traffic through Hormuz continues recovering, prices could ease as supply improves. If the conflict instead spreads further into Saudi infrastructure and the Red Sea while inventories continue falling, the world enters a considerably more dangerous phase.

That is why the comments from oil executives matter more than Snyder's customary warnings of disaster. These are companies that understand the physical system: wells, pipelines, refineries, tankers, storage facilities and inventories. When their executives say that the mechanisms that absorbed the original shock have largely been exhausted, it deserves attention.

A genuine fuel crisis does not necessarily begin with empty petrol stations. It begins when the margin between supply and demand disappears and prices are forced to perform the rationing.

That appears to be the stage the world is approaching now. Diesel prices are already signalling stress, oil is above $100, strategic and commercial inventories have been depleted, and infrastructure specifically designed to bypass the world's most important oil chokepoint has itself become a target.

Snyder's characteristic conclusion is that something much worse is coming. Perhaps it is, perhaps it is not. That remains prediction rather than fact. But on the narrower proposition at the centre of his article, he no longer stands very far outside the mainstream. The argument is no longer about whether prolonged disruption of Middle Eastern oil supplies could produce a fuel crisis.

The oil industry is warning that the crisis has already begun. The question now is how long it lasts and how much more infrastructure is damaged before the flow of energy begins to recover.

https://michaeltsnyder.substack.com/p/even-the-mainstream-media-is-admitting-8f4