Have you noticed how the Democrats send a memo around with new talking points, and then everyone uses them? From congressmen to television hosts to the ladies on the View, they all repeat the same talking point, often word-for-word.
Well, on Friday, it felt to me like someone had sent a memo to all the YouTubers explaining that the airlines are running out of jet fuel, the truckers are running out of diesel, and even Walmart and your local service station are running out of 10W-30 motor oil. On YouTube, Bear Independent talked about it (and has been for weeks). Monkey Werx talked about it in relation to airlines. Gold channels and financial channels talked about it as it relates to the price of oil and the rising rates on bonds. Channels covering the Ukraine war were talking about how the Ukrainian drones were destroying the Russian oil infrastructure. News channels were talking about it in relation to the Iran war and Strait of Hormuz. Even The Wall Street Journal wrote about oil, gold, and bonds and what that means for the consumer and the economy.
Overnight, it appears we have a “sudden” oil shortage. You know, the same oil shortage that those of us who were paying attention and preparing for before and immediately after the start of the Iranian war.
Panic Buying
This media coverage creates panic buying, which, in turn, creates the very shortages people fear. If guys who use a quart of bar and chain oil every three or four years are scared into buying a gallon “just in case,” then it will disappear off shelves and we’ll have a shortage. And then next year, there will be a glut because these guys won’t need to buy bar and chain oil. People like us—who accumulate their supplies a little at a time over years—don’t contribute to the shortage because we buy in times of plenty. And by keeping goods on our shelves instead of the store shelf, we are helping the economy by creating demand.
I hope you have a stock of bar and chain oil, motor oil, and some spare cans of gas. If not, join the panic! Stock up while you still can. Just plan and prep better next time.
Did I mention that the price of diesel is going to drive up the cost of food and everything else? At least, that’s what the media says, and it’s easy to see why. Because “everything” is delivered by truck. Or boat. Or train. Some things are delivered by all three.
It makes me wonder if this is a coordinated propaganda attack from China, Iran, or another adversary. I’m not suggesting that the price of gas, aviation gas, and oil have and won’t continue to rise, as will the price of food, only that some external source may be highlighting it in a coordinated push to stir up anger and resentment against the war in Iran. I’m also not suggesting that the YouTubers are willing participants, only that some of them are being used or manipulated.
Oil as Energy
When we talk about stockpiling a case of 10W-30 or a five-quart container of 5W-40, we’re talking about oil as a lubricant. Same with bar and chain oil. In those forms, oil is a slippery substance that reduces friction and allows easy movement of metal parts with less heat buildup and deterioration. Grease and oil are a necessity, but the real value of oil is its ability to hold energy and release it when burned. By controlling the rate of that burning, we can control the release of energy far more simply than we can control solar power and with far less complexity than it takes to control nuclear power.
Because of its popularity as a source of power, the price of oil concerns us because it affects the price of gasoline, diesel, and jet fuel, and possibly our cost of electricity or winter heating. We should not ignore its use as a feedstock for fertilizers, polymers, and a host of chemicals. Anything synthetic probably has oil or its cousin gas somewhere in its family tree. Oil—a highly concentrated, easily portable form of energy—is both an energy resource and a feedstock that everyone needs, and natural gas is right up there with it. That makes it tremendously desirable, which in turn makes it valuable.
Oil as a Weapon
That very desirability—the fact that farming, manufacturing, and (of course) many forms of motive power can’t work without it—allows oil to be used for leverage and as a weapon.
That’s what is happening now:
- The U.S. is preventing Iran from selling oil and gas to pressure the Iranian regime and hasten its demise. This is rather the opposite of the 1970s oil embargo.
- The Iranians have shut down the Strait of Hormuz to punish the world for the United States’ actions against Iran. This, more than a few missiles shot at the UAE and Qatar, is Iran’s biggest weapon.
- OPEC has been a way to control and direct oil as a weapon, but the UAE left OPEC to send a message to Saudi Arabia, strengthen its relationships outside the Gulf and with the U.S., and because it wanted to decide how and where to use its oil as a weapon.
- While oil in and around Iran is a tactical weapon, the U.S. is using oil as a strategic weapon against China, sanctioning Russian oil, taking over Venezuela, and preventing delivery of Iranian oil, all key suppliers to China. It’s a slow but effective response to China’s restrictions on rare-earth minerals.
- While the attack is aimed at China, many other countries, like India and Australia, are caught in side effects.
- These actions have some negative consequences here, but far fewer than in most of the developed world. While Americans are feeling some pain, Trump has decided a little pain today is better than a lot of death and destruction tomorrow. Plus, our pricing pain is minor compared to the energy anguish being felt in much of the world. And that includes our allies in Europe, Asia, and Australia. Too bad, so sad. “America First” means Trump doesn’t much care.
Oil as Wealth
We often hear about the “petro dollar,” whether or not we understand the term. But do you notice how the “petrol” part comes first? Oil and the ability to buy it with dollars is what gives value to the dollar, not vice versa. That’s why Gulf nations with large oil reserves have become wealthy in the past century.
Oil powers Russia’s war machine and its economy. It boosts ours. The lack of oil threatens India, where the rupee is crashing and gold is soaring.
Even as the war in Iran festers, while airline flights are being canceled and food prices are rising, investors are making money. Because someone always does.
The Next Wave
Another memo must have been sent around, because this evening I heard from multiple places that the U.S. could start attacking Iran again “as soon as tomorrow,” meaning Monday. Could be. I think the upcoming holiday weekend is more likely because markets will be closed and no one in the U.S. will be paying much attention to the news.
Either way, if you’re planning to drive somewhere for Memorial Day Weekend, fill your tank up before the price jerks up another 20 or 30 cents per gallon.
