Literally.
Rosneft’s Tuapse Oil Depot and Export Facility in Krasnodar Krai, Russia hit by Ukraine drones.
Early in the war the US told Ukraine to not target these ports, just refineries. They complied and it led to Russia having to dump their unrefined oil on the world market bringing prices down, and Russian revenue limited.
The Trump war in the gulf has sent oil prices up and Trump just unrestricted Russian oil. To keep Russia from gaining revenue, Ukraine has turned to taking out oil ports.
For the world that means less oil from both the gulf and Russia… shortages are finally hitting many countries and there is little coming to the rescue.
I expect as the ground invasion of Iran begins, they will take out another 15% of the gulf’s oil supply. From 15% today to 30% of global exports down. There will be no swing nation. The US can barely ramp up production and at current manipulated low prices I see no sane oil CEO investing in more future production.
My baseline is ground invasion, more oil capacity destruction, economic slowdown/shutdowns in Japan, Europe and elsewhere. The lack of aluminum will hit Japan hard in July or August. Global depression in inevitable.
A ground invasion will not release the strait or fix capacity. It might destroy Iran’s oil capacity too. It will take many months to secure the country, IF we are successful.
The Grand Strategic win goes to China unless the US controls all of the gulf. If not, the PetroDollar dies and the PetroYuan rises. Hell, they produce everything anyway. No more recycling world trade into US Treasuries. A reduction in reserve Treasuries at overseas central banks has already started. Interest rates will rise, not fall.
The US loses its golden egg. The world reserve currency that allowed us to run huge government deficits and huge trade deficits. We will have to pay for the budget with money printing or higher taxes on the wealthy. I know which one I would choose but the wealthy run the circus.
Money printing will lead to a dollar devaluation (think inflation). Those who think this will increase US manufacturing and exports enough to mean anything are delusional. America will become poorer and weaker and not be able to support a robust defense or our social obligations.
Do not expect the media to keep up or even try. They have their orders. It is going to be a dangerous summer in many ways. It will not return to the way it was either.
Instead of saying invest smart or invest safe, I will simply say prepare.
Michael