Everything is fine. Except for food and fuel.

by | Jun 10, 2022 | Biden Administration, Blog Articles, China, Energy, Finance, Inflation, Stormwall Book, USA, War, Why America Matters Book

The commodities traders sitting in Geneva and Houston who buy and sell oil and gas for their industrial clients have a stern message for us. We haven’t yet seen the worse of the fuel crisis.

Bottlenecks will hit the supply chain, and prices will go much higher, later this summer. This is all but inevitable, barring some radical change to the US government’s domestic energy policy and the West’s oil sanctions imposed on Russia. The Biden administration refuses to take practical steps to increase domestic production and availability. Recently imposed sanctions are designed to block the world’s third largest oil producer, and largest exporter, from exporting to Europe by the end of the year. The consequences of these policies are inevitable.

For decades now, the US oil industry has been constrained by Federal regulatory agencies from building new refining capacity. According to the CEO of Chevron, no new refinery capacity has come on since the 1970s, and the total number of operating refineries has been cut in half. This makes little sense given the abundance of US oil reserves and processing potential, but this is the distorted reality created by the Green regulatory regime. Even still, the supply chain has managed to work well enough when markets operate normally.

But in times of stress such as now, the weakness of the system becomes apparent. China paused oil exports in April and is threatening more. Russia has had their European exports cut off by EU embargoes, although China and India are already picking up the slack and buying Russian oil. The US has prematurely begun draining its Strategic Petroleum Reserve ahead of an actual emergency in a futile attempt to counter rising retail prices. Some of the release appears to have been exported to Europe. The SPR is now at the lowest level in 35 years.

Shortages or rationing are not out of the question this summer. Fuel shortages will precipitate a food crisis that is already looming from a combination of war, sanctions, and natural disasters. This is true for many reasons (blocking export of fertilizers from Russia, for example), but especially because the food supply chain is completely dependent on the diesel-fueled trucking industry. In the United States, over 70% of food products are shipped by long-haul trucks. While Tesla and others expect to release production models in the next few years, electric-powered trucks make up a tiny portion of the US interstate fleet today.

Truckers are going to find it increasingly difficult to afford diesel and to make a decent living. This will have two obvious effects. Prices of food and consumer products are going to rise dramatically to accommodate the increase in transportation costs. May 2022’s inflation reading of 8.6% (CPI), the highest in 40 years, may seem mild in retrospect. Truckers are going to conclude that they can no longer afford to drive for a living. This isn’t speculation. Truckers are already quitting the industry in record numbers, leaving what is a difficult and high-turnover occupation in the best of times.

It is time for Americans to take small but practical steps to prepare themselves. Where possible, buy stores of food and fuel in advance that will be sufficient to get through the summer. I’m not advocating hoarding, but rather that American families take prudent action to ensure they have an adequate supply of food and other essential products (medicines, etc.) to sustain themselves and their children for a number or weeks or even months before these issues worsen as the summer advances. Protecting your family is not selfish. It’s also not your fault that others refuse to heed the warnings.

This was totally preventable. And in some ways, it still is, although the short-term effects can’t be avoided now. For reasons that are almost too troubling to contemplate, the administration seems to be intentionally provoking a domestic civil crisis. And they may very well succeed. Nothing fuels social unrest quite like food shortages and famines.

I’d love to look back on this article two years from now and find that I was wrong. But I doubt that I am.

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