You know what this feels like? COVID around Late January 2020. Most people have no idea what’s coming, but those of us who were tracking it closely knew differently. In this podcast, Craig Hemke and I talk about oil, gold, and markets.
We discussed the massive oil supply shock from the Middle East conflict — missing 14.5 million barrels a day or more, with depleting buffers and infrastructure damage that could take years to repair — pushing the global economy toward a contraction like 2011, when it was 36% smaller, while markets get manipulated to suppress prices and maintain the illusion of calm. This is a poly-crisis involving LNG, fertilizers, precursor chemicals, helium, sulfur, and more, likely triggering refinery shutdowns, soaring inflation in the teens, stagflation, and a demand shock that will force even bigger Fed printing than COVID. We also covered market interventions, from silver-style dumping in oil to hidden treasury flows, and why resilience matters now. The full interview is below!
I am having trouble with the disconnect between what I know from paying attention over the last few years and the rest of the population out there. I still feel unprepared even though we are in a pretty good position. I am putting another system with 5 KW of used solar panels on the barn and just ordered the inverter and battery.
Looks like 2026 will have hundreds of thousands of EVs coming off lease and now that we will have power in the barn planning to pick up a pure EV. For now our Chevy Volt has 40 miles of battery so most trips are free. Beyond that it carries 300 miles of gas.
We have solar on the house with batteries but it is Solar Edge so “they” control it and I have to have an app. Tucson Electric Power sent me an email, they partnered with Solar Edge and want to use my battery storage to balance their load, probably when I really need it, for which they will pay a pittance every year. NO thank you. Really wish I could go totally off grid. I agree secondary backup for your backup systems. Just picked up a used distillation unit to use up that extra power on the barn now. May need to purify the water. Backup for your backup.
That was a good summary of these past two months and what likely comes next.
The fake & gay markets and price setting actions are things that worry me the most at the moment. One of the best emergent features of capitalism is price discovery. Hot-wire that and it’s no longer capitalism, and capital – real capital, not printed currency – gets misallocated and ultimately squandered. When the inevitable poverty sets in, the midwits will shout “capitalism failed us!” and demand some flavor of socialism. (Already happened in NYC, though for a slightly different set of reasons. If it can happen there, it can happen in your locale too.) If they get their socialism, we turn into Venezuela writ large and are in for generations of misery.
Back to markets, if we had an honest oil market, I expect we’d be somewhere around $200/bbl and headed higher. Not fun, but at least we’d have a steady supply next year and somewhat automatically begin rationing now. As it is, woo-hoo, the uninformed can party on today, and have a bigger crisis next year.
Taking this as action for now, as Chris and Craig discussed, it’s better to pay today in yesterday’s prices for tomorrow’s stuff. I didn’t need to upgrade my two small solar power systems right now, but it was on my to-do list and, well, there’s no time or price like present. By chance I caught a nice sale too. I am very glad to have pony-ed up for a new water heater. Could’ve held on through the summer and replaced it in the fall, but probably at a somewhat higher price – if available at all. In the meantime truly hot water again is nice. A stock of work pants, boots, bicycle parts (nb: mostly made in the far East), all the little things that were on my “over the next year” list got done these past two months, and brother do I feel better for it.
So, yeah, nice summary discussion for a rainy Saturday afternoon. Thanks.
2011 world economy was 36% smaller… So what does this consist of? Smaller world population? What else? 36% is staggering number and population has started to slow in growth for decade or 2.
I havent noticed change… nor do I need more things.
I take big chunk is more dollars needed to buy same milk and fuel now, thus Economy bigger when nothing changed… but that should mean same or a tad bit lower oil consumption… but it is growing all this time…
Sounds like you have solar nailed down. I’m a babe with my used solar panels, inverters, controllers, and LiPO battery. It’s the big project when I get home from my North Dakota annual pottery gig next week. I’ll purchase an ATS when I get home. How are you doing for fresh water? Man, Tucson, water must be an issue down there.
FWIW and it’s probably anecdotal but I’ve been here in the Baaken region in ND since last Sunday, people who have construction businesses, seasonal type jobs, farm equipment maintenance, etc are all getting hired/rehired to the oil fields. I chatted with a guy who has a small fix it business in Beach and he’s closing temporarily to go up to the oil fields as are many others. The oil equipment storage yards along I94 west of the Missouri River are empty. They were full the past couple of years.
I asked one guy who starts Monday on a fracking rig south of Beach how oil was doing since the slow down of the past few years and he said it’s cranking back up. Also the Baaken delivery premium has started again for people getting anything shipped up here. Diesel’s approaching 6 bucks in a freakin’ week. Gas went up seventy cents since last Sunday. Three hamburgers, fries and three drinks cost 50 bucks at the Tastee Hut in Wibeaux, Montana.
And yet, NO ONE has a clue why. If it’s ten times COVID, anyone that hasn’t at least started a garden or getting resilient, is screwed.
iPhone battery was expanding today so I went to the Apple Store. Worker there said “I’m sorry normally I would be able to fix to is on the spot for you. We don’t have any parts. Some phones we just can’t do anything with because we can’t get any parts right now for anything.”
