20% shortfall, 100% collapse: the true logic of the energy crisis

Original title: The World Only Lost 20% of Its Oil?

It's not like it's a bad idea

Original by Peggy, Block Beats

According to the article, the current global oil supply is only about 20 per cent short, but the real cause of the crisis is not a “physical shortage” but rather a three-fold chain of behaviour triggered by scarcity: hoarding, speculation and the capital logic of “waiting the collapse of rivals”。

From a 20% supply gap to a disruption in transport in the Strait of Hormuz, to a short-term "filling" of strategic reserves, alternative pipelines and production capacity mismatches, the system appears to be still functioning; but at a deeper level, hoarding, speculation and "waiting collapse" capital behaviour are widening the gap itself from a manageable supply and demand problem to a potential systemic risk。

The article further states that such risks are triggered in a manner that does not follow the instinct of " progressive deterioration " , but is closer to a run-off — everything seems to be stable before confidence breaks; and once key variables are confirmed (stock bottoms, gaps widen, transport cannot be restored), the market will complete the re-pricing in a very short time. From the oil crisis of 1973 to the financial crisis of 2008, to the energy shock of 2022, the path is highly consistent。

In this framework, the current market ' s "quiet" itself is the most alarming sign: the real economy has experienced a decline in production, restriction of movement and contraction of supply, but asset prices continue to perpetuate risk preferences. This departure is essentially the last consensus that the system is still valid。

The central judgement of this paper is that the problem is not whether oil is not enough, but that once enough people begin to believe that it may not be enough, the system goes into contraction and revaluation ahead of schedule. The strategic reserve can only extend the window of time but cannot provide the answer; the window is closing quickly。

By mid-April, it will be a key node. At that point, the market will have to face more than "if or not" but "when to confirm"。

The following is the original text:

The world is about 20% short of oil. Theoretically, the economy can continue to operate with a few belts。

But the "shortfall" in reality never worked that way. When there is a gap in a key resource, people do not have rational ration, but start hoarding and speculation. And those who have more? They'll wait for you to crash and buy your best assets at cabbage。

These three behaviours would magnify an otherwise manageable gap into a problem at the level of civilization。

Storage, speculation, and vulture waiting

The first thing that happens is hoarding. Once the "shortfall" is on the news headlines, everyone starts panicking about buying -- not because they really need it, but because they're afraid. They're not buying oil, they're buying "a sense of security". The fear itself is sufficient to double the actual shortfall。

Then there was speculation. When oil is scarce, traders rush in and prices quickly disengage. This is not a theory, but an iron law of the bulk commodity market. Almost every energy crisis in history has followed that path。

The last and most cruel layer: when you fall。

Why doesn't anyone sell oil

Omani crude oil has been traded at a price of between $150 and $200 per barrel. However, oil-deficit countries are still not likely to buy it, as dollar-holders have already locked their supply。

Some countries still refuse to sell to their neighbours even though they have sufficient reserves。

Why? Because they see a bigger game: waiting for a debt crisis to break out, waiting for social unrest and then buying the best assets globally at very low prices. In normal times, when a country is on the verge of collapse, companies worth $50 billion may need only $5 billion to take it down — without a single blow。

Berkshire Hathaway currently holds nearly $37.5 billion in cash, a record record. This accumulation began long before the war and netted assets for 12 consecutive quarters. But the key is not accumulation, but when。

What's Buffet waiting for

This script has existed for 3,000 years

In Chapter 47 of Genesis, Joseph helped Pharaoh to hoard food over seven years. Seven years of famine followed. Egyptians first used money to buy food; when the money was spent, livestock were exchanged; and when the livestock were depleted, the land was handed over。

By the end of the famine, Pharaoh had almost the whole of Egypt。

No war, no violence. Only control over scarce resources and sufficient patience。

The blockade of the Strait of Hormuz is the same logic. Conquering a country by force requires hundreds of thousands of troops; and sealing a strait and waiting patiently? Just a navy and time。

Joseph, at least trying to save the people. But not the participants that operate around this crisis。

That's why a 20% oil gap is enough to bring down the world. The problem is not that there's not enough oil, but that there's people hoarding, people firing and people waiting for you to fall。

Crashes never happen slowly

Most believed that the economic crisis would be gradual. But reality is the opposite. Lehman Brothers was functioning normally the day before the application for bankruptcy; Silicon Valley Bank did not appear to be significantly abnormal for 48 hours before closing down。

The system collapses more like a run-down. When everyone trusts the bank, it works almost perfectly; once the trust cracks, everyone withdraws funds at the same time. Banks don't slowly die, but collapse in 48 hours。

The current global energy market is in the same state。

All of you are in custody in Trump, which will solve the problem quickly, and everyone is still "convincing that the system is still there." But once that trust is broken — for example, when reserves start to bottom up, or when International Energy Agency confirms that the gap is widening further — the sale will explode like a bank run。

Not incremental. It happens in a moment。

Five weeks. It's over

NOTE: THE STRAITS OF HORMUZ USUALLY CARRY ABOUT 20 MILLION BARRELS/DAY OF OIL, SO THE CURRENT CAPACITY OF APPROXIMATELY 18 MILLION-19 MILLION BARRELS/DAY LOST AS A RESULT OF THE EMBARGO HAS EXCEEDED THE GLOBAL SUPPLY GAP OF 800-11.4 MILLION BARRELS/DAY. THIS DIFFERENCE IS BEING PARTIALLY OFFSET BY THE RELEASE OF STRATEGIC OIL RESERVES (SPRS), ALTERNATIVE PIPELINES (SUCH AS THE SAUDI EAST-WEST PIPELINE, THE UNITED ARAB EMIRATES BYPASS) AND SUPPLIES FROM NON-HOLL MUZ OIL-PRODUCING COUNTRIES. HOWEVER, SUCH FILLINGS ARE TEMPORARY。

The scale of the shock has exceeded the 2022 Russian-Uu energy crisis, even known as the "most severe energy crisis in human history"。

Our judgment is that this is probably not an exaggeration。

Strategic reserve: buffer time

There are only two things that currently support the market: the continued release of strategic oil reserves and the policy and market expectations of Trump。

These figures themselves are problematic: the release of strategic oil reserves (SPRs) has a physical ceiling of about 2 million barrels per day in history. In other words, the ability to really fill the gap is much lower than the hardline number on paper。

OPEC+ NOMINALLY HAS AN IDLE CAPACITY OF 2.5 TO 3.5 MILLION BARRELS PER DAY, BUT THESE EXPORT ROUTES WILL THEMSELVES PASS THROUGH THE STRAIT OF HORMUZ, WHICH IS ACTUALLY TRAPPED。

Reserve data published by some countries also include delayed deliveries and overestimated stocks. Once the buffer period ends, the supply gap will widen rapidly. The reserve can only buy time and no solution. The market has a window period, but the window is closing。

The market is sleepwalking

The current state of the market is very magical: Israel has just been hit by the most violent missile strike since the start of the war, and the stock market has barely responded. Chemical plants in Japan, South Korea, Singapore and Thailand have begun to contract and even to stop, without being included in the market. In Australia, where fuel shortages have shifted to home-based work, the Republic of Korea has introduced nationwide restrictions, while the stock market is rising。

TRUMP SAID THAT IRAN WAS NEGOTIATING ON A DAILY BASIS, THAT IRAN WAS DENYING IT ON A DAILY BASIS AND THAT THE STOCK MARKET CONTINUED TO REBOUND. SEMICONDUCTORS ARE STILL BOOMING, THE AI CONCEPT IS STILL HOT, AND QUANTITATIVE AND ALGORITHMIC TRANSACTIONS ARE MAGNIFYING THIS OPTIMISM. BUT IF YOU TAKE A CLOSER LOOK, YOU'LL FIND THAT A LOT OF THINGS ARE ACTUALLY RED, BUT EVERYONE PRETENDS NOT TO SEE。

This deviation between market performance and the real economy will not last long. Never in history。

The cards in Iran

A lot of people are in custody in Trump, which will soon solve the problem. But look at Iran's current position。

THE IRANIAN ISLAMIC REVOLUTIONARY GUARD CORPS (IRGC) HAS MADE IT PERFECTLY CLEAR: "THE STRAIT OF HORMUZ WILL NOT BE REOPENED BECAUSE OF THE ABSURD PERFORMANCE OF TRUMP. WE HAVE NOT ENGAGED IN ANY NEGOTIATIONS, NOR WILL WE TALK ABOUT THE FUTURE.”

There is also the real issue of communication itself. There is no justification for the bigotry that Iran's seniors are not now dealing with any operational level of affairs by telephone or encryption software — Israel had assassinated Haniyah in Tehran and detonated Hizbullah's pager. Thus, real communication between Tehran and Washington can only be transmitted through intermediate channels, such as Oman, Iraq and Switzerland, each round taking several days。

Iran’s Accounting

Iran doesn't need to win. It just needs to last longer. The strait blockade is its biggest card, and it has found America's soft spot. Russia is supporting it, and China is providing it with “humanitarian assistance”, and it will not starve。

The revenue from tolls in the Straits alone could bring tens of billions of dollars per year. If the United States retreats or falls into chronic depletion, Iran can continue to control the Strait. The wealth that would otherwise flow to the Gulf monarchy would also be diverted to Tehran。

Trump's dilemma

No: the oil dollar system is starting to loosen。

Hit: Oil prices soared. If the war is prolonged and Gulf crude oil cannot be shipped, the financial pipeline that sustains the United States stock market will dry up。

The real risk is that the United States dollar may experience a sharp depreciation. If the oil dollar loses its anchor, all United States dollar-denominated assets will be repricing. And the worst thing is that no one inside the White House seems to have a clean answer to this question。

What's next

US SPR Weekly Report. Reserve consumption speed is the most direct signal. Brent crude oil spot and futures curve. The depth of the contango means that the market is in a chronic shortage of pricing. Trump's tone. The heavier the story, the worse it is。

PLANT START-UP RATES IN ASIA. THE DECLINE IN CHEMICAL, MOTOR AND SEMICONDUCTOR PRODUCTION WILL BE THE LEADING INDICATOR. FERTILIZER PRICES. FERTILIZER PRICES TEND TO BE MORE HONEST THAN THOSE DISTORTED BY VERBAL INTERVENTIONS. IEA MONTHLY. IF THE MID-APRIL UPDATE CONFIRMS THAT THE BUFFER IS EXHAUSTED, MARKET CONFIDENCE MAY BREAK OVERNIGHT。

Timeline

ACCORDING TO THE FEDERAL RESERVE OF DALLAS, IF THE STRAIT OF HORMUZ REMAINED CLOSED THROUGHOUT THE SECOND QUARTER, ANNUALIZED GDP IN THE UNITED STATES WOULD SHRINK BY 2.9 PER CENT. MANY AGENCIES ARE ALSO INCREASING THE PROBABILITY OF RECESSION. THESE PROBABILITIES ARE PREMISED ON THE FACT THAT THE EMBARGO CONTINUES TO ENTER ALL STAGES. IF THE STRAIT RESUMES NAVIGATION EARLIER, THE SUBSEQUENT PHASE WILL NO LONGER APPLY。

Now April 15: Reserves are still being released

THE STRATEGIC RESERVE CONTINUES TO BE PUT IN PLACE, AND TRUMP CONTINUES TO SHOUT. GDP HAS BEEN AFFECTED TEMPORARILY. BUT IF THE ULTIMATUM OF APRIL 6 FAILS, THE SUPPLY GAP WILL WIDEN RAPIDLY. PROBABILITY OF GLOBAL ECONOMIC DISORDER: 20-30 PER CENT

Late April, early May: see you in reserve. Bottom

NATIONAL STRATEGIC RESERVES ARE BEGINNING TO BOTTOM, AND IEA CONFIRMS THAT THE GAP HAS DOUBLED. THE IMPACT AT THE REAL ECONOMIC LEVEL IS BEGINNING TO BE CONCENTRATED: FERTILIZER SHORTAGES, SPRING FARMING DELAYS, CHEMICAL SHUTDOWNS, LNG TENSIONS, AND A REDUCTION IN INDUSTRIAL PRODUCTION IN EUROPE. PROBABILITY: 45% - 65%. THIS IS THE KEY POINT。

End of June: deterioration of the real economy

Oil prices have broken 150 to 200 dollars per barrel. High oil prices began to suppress all economic activities. Countries competed for supplies from Russia and India, but the results were limited. Europe and Asia will take the lead in the recession. Probability: 65% - 80%

After June: System collapse

There are no new alternative supply routes. As a result, there has been a combination of stagnating, unemployment and central bank failure. If the interest rate increases, the US debt of $40 trillion will become unsustainable; without interest, inflation will run out of control. With the food crisis and social unrest, the probability of gold will refresh history. Probability: 80% - 90%

Upgrade

If the United States strikes directly at Iran ' s energy infrastructure, the probability of each of these stages increases by 20 percentage points。

The oil crisis of 1973, the Lehman Times of 2008, and the Russian-Uu energy shock of 2022 have never changed: Before the data were really confirmed, everyone pretended not to see; and once the data were confirmed, the real sale would begin。

We're at that "pre-confirm" stage. April 15th to 25th is the critical window period. The ultimatum is the first catalyst。

If the strait is reopened, the market will gradually return to normal; if it is not opened or the situation continues to escalate, the market will begin to take over the business collapse itself before it collapses。

The world doesn't really need to use oil to make problems. It only needs enough people to believe that this could happen。

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