This article was originally published by Michael Snyder at The Economic Collapse Blog under the title: The World Is Approaching “Tank Bottoms” As Experts Warn That Very Painful Oil Shortages Are Ahead This Summer
Without sufficient quantities of oil, the global economy will not be able to operate normally. So the fact that the global economy is running a massive “oil deficit” right now should deeply alarm all of us. Ever since the war with Iran began, the world has been consuming far more oil than it has been producing. We have been running down commercial oil inventories and strategic oil reserves all over the planet, and now those supplies are starting to run dry. In the not-too-distant future, global demand for oil will substantially exceed what is available, and that will mean much higher prices and very painful shortages. Asia will be hit the hardest because they are more dependent on oil from the Middle East than anyone else, but we will certainly feel this crisis very keenly as well.
According to the International Energy Agency, global oil stocks are being depleted at a record pace, and they could reach “critical levels” by the middle of the summer…
Global oil inventories could hit critically low levels ahead of the peak July-August fuel demand period if drawdowns continue at their current pace, the International Energy Agency said Tuesday.
Global oil stocks fell by more than 250M barrels between March and May, with on-land commercial and strategic stockpiles draining at a record pace, the IEA reported.
“We’re seeing stock draws continuing into the summer, and with the possibility or the likelihood that we reach critical levels or historical low levels just ahead of the peak summer demand,” said Toril Bosoni, the head of the IEA’s oil industry and markets division.
This isn’t a crisis that may or may not happen someday.
This is a crisis that is very real and that is rapidly approaching.
One expert is warning that we are headed for a “disaster” and that rationing could start to happen in some areas of the globe during the months ahead…
The supply situation is manageable for now, but higher summer demand in July and August likely would lead to rationing, Baron Lamarre, former head of trading at Petronas, told Dow Jones.
“The cry is that they want a deal right now because if they don’t have it three months from now, there will be a disaster,” Lamarre said.
A lot of people out there seem to think that the U.S. will be immune because we produce so much of the oil that we use.
But the truth is that U.S. oil stocks just fell “to their lowest level in two decades”…
Donald Trump’s Iran war has driven US oil stocks to their lowest level in two decades as his administration drains stockpiles to contain surging prices and exporters capitalise on the drop in Middle Eastern supply.
US government data published on Wednesday showed total stocks of crude and petroleum products such as petrol fell by 10.6mn barrels last week to 1.57bn barrels — the lowest level since 2004.
The sharp fall triggered new warnings from industry analysts that oil prices are poised to move sharply higher again within weeks.
We are running an “oil deficit” too.
It isn’t as severe as what we are witnessing in other industrialized nations, but it is significant.
Withdrawals from the Strategic Petroleum Reserve have helped keep things running fairly smoothly, but the fact that in recent weeks we have seen “the largest weekly withdrawals in history” is not a good sign at all…
The Strategic Petroleum Reserve is also part of the backdrop. The EIA reported that SPR inventories fell by 9.1 million barrels during the week and were 36.2 million barrels below year-ago levels. The recent drawdowns in the SPR have been the largest weekly withdrawals in history.
Gasoline inventories in the U.S. are falling too.
In fact, we just witnessed the largest February to May gasoline drawdown ever recorded…
In early February, U.S. gasoline inventories reached 259.1 million barrels. By late May, they had fallen by 47.5 million barrels in roughly 15 weeks.
In weekly EIA data going back to 1990, there is not another February-to-May gasoline drawdown that comes close. The next-largest drawdowns were clustered around 30 million barrels, and that was 15 years ago. This year’s decline is far larger.
That does not mean gasoline shortages are imminent. It does mean the market has burned through a remarkable amount of inventory before the summer driving season has even fully arrived.
If the Strait of Hormuz is not reopened, shortages are inevitable.
The only debate is about when they will hit.
One industry insider just told Politico that his company has warned “the highest levels of government about what’s coming in mid-to-late June”…
“We’re at dangerously low levels already,” said one industry executive who was granted anonymity to discuss private conversations with the administration. “We have shared those concerns at the highest levels of government about what’s coming in mid-to-late June. … I hope they are paying attention to inventories right now. You’re hitting tank bottom.”
He isn’t talking about June 2027.
He is talking about this month.
Another expert is warning that we could be “looking at industrial shortages” if the situation in the Strait of Hormuz does not change by September or October…
Drained storage tanks are an “iceberg under the water,” Helima Croft, global head of commodity strategy at RBC Capital Markets, said during a Council on Foreign Relations event Wednesday.
“You may not see immediately on the horizon the actual economic challenges that will be coming, because you look at the flat price and you say, ‘OK, we can muddle through this and Iran will come to terms eventually,’” Croft said. “But if we get in a situation where we have this strait effectively closed, or the strait status quo, and we’re sitting in September or October, then you’re going to be looking at industrial shortages.”
Needless to say, an agreement to reopen the Strait of Hormuz is not going to happen right away.
If the U.S. and Iran are able to eventually reach an agreement, we are being told that it could take six to eight months to fully restore traffic to pre-war levels…
A full reopening of the Strait of Hormuz could take 6-8 months in the best-case scenario if an agreement was reached today, Bosoni said at the S&P Global Energy Middle East Petroleum and Gas Conference in London.
What this means is that global energy supplies are going to get tighter every single day for an extended period of time no matter what occurs now.
Gasoline prices will continue to rise, and shortages and rationing are looming.
We desperately need the war to end and the Strait of Hormuz to be reopened as soon as possible.
But I don’t think that is going to happen.
Instead, I think that the Great Middle East War will soon go to an entirely new level, and that won’t be good for the global economy at all.
Michael’s new book, entitled “10 Prophetic Events That Are Coming Next,” is available in paperback and for the Kindle on Amazon.com, and you can subscribe to his Substack newsletter at michaeltsnyder.substack.com.
About the Author: Michael Snyder’s new book, entitled “10 Prophetic Events That Are Coming Next,” is available in paperback and for the Kindle on Amazon.com. He has also written nine other books that are available on Amazon.com including “Chaos”, “End Times”, “7 Year Apocalypse”, “Lost Prophecies Of The Future Of America”, “The Beginning Of The End”, and “Living A Life That Really Matters”. When you purchase any of Michael’s books, you help to support the work that he is doing. You can also get his articles by email as soon as he publishes them by subscribing to his Substack newsletter. Michael has published thousands of articles on The Economic Collapse Blog, End Of The American Dream, and The Most Important News, and he always freely and happily allows others to republish those articles on their own websites. These are such troubled times, and people need hope. John 3:16 tells us about the hope that God has given us through Jesus Christ: “For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.” If you have not already done so, we strongly urge you to invite Jesus Christ to be your Lord and Savior today.
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