Is the U.S. Facing a Petroleum Supply Crisis?

Ajouté : 2026-05-22

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[00:01:10]Hello everyone and welcome to your morning report for Thursday the 21st of May 2026. Let's jump into our executive summary. The Senate could vote on the ICE funding reconciliation bill as early as today. That's $72 billion to fund ICE and Customs and Border Protection. The White House is planning an AI cyber security executive order that could be signed as early as this afternoon. A federal district judge called for opposing parties and DOJ cases to res resist subpoenas is a Rhode Islandbased federal district judge. New York Democrats said they are preparing to redistrict ahead of the 2028 election.

[00:01:45]Top Trump officials are scheduled to make a major fraud announcement in Minneapolis, Minnesota today. And this includes HHS Secretary RFK Jr. and acting attorney general Todd Blanch. And in Homeland Operations, Borders are Tom Holman in an interview yesterday said that self-deportations were part of Trump's immigration plan from the beginning and DHS is preparing to release more immigration data in the coming months.

[00:02:08]>> All right. Out on the global stage, the US is preparing to remove more national security threats in Cuba and Mexico while his primary adversaries fail to produce a critical piece of energy infrastructure despite being in an energy crunch. And looking forward, it looks like the US is likely to remove key Cuban leadership between the end of the war with Iran and the end of this summer. Thank you for that, Jared.

[00:02:28]Before we get to the full report or the the normal report uh today we have an in focus and after yesterday's show I really wanted to do a deeper dive with more details into this question of is the US facing a petroleum supply crisis and this was spurred by a few weeks ago I covered Carlile group senior adviser Jeff Curry warning that in by the 4th of July the United States would be facing tank bottoms for oil gasoline and distill fuels.

[00:03:01]And in this case, tank bottom does not mean a complete emptying of stock piles.

[00:03:04]But what it really means, as far as I can find, the agreed upon definition is is operational minimums required to keep petroleum products flowing through infrastructure through pipelines and storage tanks.

[00:03:18]and I went into the last eight weeks of information energy information administration uh data and their short-term energy outlook. They did release their latest report on petroleum stocks last night.

[00:03:37]And since what I'm we're looking at what I really wanted to look at was especially gasoline and distilled fuels. So in the week ending on the 24th of April, we saw a peak of 6.1 million barrels or sorry one of the eight one of the two peaks in the last eight weeks of of a negative 6.1 million barrel draw for gasoline and negative 4.5 million barrel draw for distillates. And then again in 10 April a 6.3 million barrel draw for gasoline and 3.1 million barrel draw for distillates. And these were significantly higher than historical averages. However, looking at the latest data again going through the last 8 weeks, that has tapered off. The draw down rates for the commercial stocks of gasoline and distill it fuels has tapered off significantly. But I wanted to look at what the average was. So I I looking at the eight weeks, I got to an average of uh 3.4 million barrel draw per week of gasoline. At the current 214 million barrels of gasoline stocks, it would take based on that average rate almost 30 weeks to drop to about 50% of that.

[00:04:49]The problem, one of the intelligence gaps I ran into is what is considered the operational minimum. The EIA does not publish a hard number mostly because it is a fluid number, a fluctuating number. And the the best definition I could find is the minimum amount of a product in pipelines and storage tanks to keep pressures up to be able to continue shipping petroleum products.

[00:05:18]I looked at another metric for uh gasoline what EIA calls days of supply and this is basically a measurement of gasoline demand for the week ending in 15 May. This is the latest data available. The EIA says we have 24.2 2 days of supply. And this has been tightening since January, but looking at past data, this is not this I don't I don't want you to take this as the US only has 24 days of gasoline available and we're running out of gas. That's not what this metric means. What it mean what it is is an indicator of tightening or slackening demand. And in this case looking at the last four months, last five months, it is I think a signal of of growing demand. One of the important points about this looking at the last few years of this metric, it does seem like this indicator of growing demand is growing or this this indicator is is kind of growing uh or shrinking in the case of how this is measured much earlier than previous years because it has days of demand or days of supply has dropped as we head into the summer travel season. And this year we saw we saw this this measurement this metric start to drop earlier in the year especially right after the beginning of Iran operations.

[00:06:43]Now I think what is happening here is that Jeff Curry is one his key assumption his first key assumption is that the peak amount of use the peak amount of draw down uh is was going to remain consistent because when he went on to Bloomberg TV it was right after one of these peak weeks of draw down for gasoline and distilled fuels. I think the second key assumption he he is making is that there the Trump administration is not going to do make any move and just allow oil, gasoline and distillates to hit tank bottoms.

[00:07:21]Now I'd like to bring Matt on because we were actually talking about this before the show. Now the Trump administration what they have been doing this is this is what I've seen they've been doing.

[00:07:31]They've been trying to bully and cajol oil producers into just producing more oil. Now there, as we talked about before before the show, there are actually there's there's a couple of key reasons why this is not happening.

[00:07:45]>> Yeah, absolutely. So the the Trump administration going back quite some time has has encouraged the the oil and gas majors to increase drilling and production. Uh there there are several structural reasons why he hasn't seen any progress on that. Part of it is the the capex the capital expenditure expenditure timeline is is much longer than Trump's political timelines. So the fastest that an oil oil oil and gas major can get oil out of the ground is fields that are already developed. So all the infrastructures in place the pad is already poured. The there there are working wells already.

[00:08:29]The pipelines exist.

[00:08:32]There are there are uh there are ways that uh those pads can have more wells drilled on them and that's the absolute fastest that you can increase production which we would see a best case scenario you could see increased production in 6 months 6 to9 months. However, one of the tensions there is that's not the most efficient way to manage that field from the owner's perspective. uh putting more straws into that field does get o uh oil and gas out of the out of the ground faster, but it's not the most efficient way to manage that field. And you'll actually see a lower production over the lifetime of that field. That's not to count the fact that that's that's only one type of field and that's really we we see the fastest production in in shale fields. When when Trump goes when President Trump goes to the oil and gas majors and says, "Do more drilling." If you're looking at green field production, a a very fast timeline to develop a green field incredibly fast is five years. And we're talking significant significant capital expenditure. And the the fiduciary officers of these of these oil companies, they have to look at capex decisions over decades. So what is uh what what are their projections for the the the environment the the the market over the next five to 15 to 20 years?

[00:09:56]And those kinds of conservative capital expenditure decisions don't run on the same political decision cycle that President Trump is.

[00:10:05]>> And this brings me to what I think the most likely course of action here is.

[00:10:11]Now before real really quickly I did also look at oil and I have since they since they announced the the 172 million barrel commitment from the strategic petroleum reserve. I did point out that this would bring the SPR down to a historically low level below when the SPR was originally established.

[00:10:33]I think this is we'll get to this later in in my most likely course of action but I I think that is significantly going the the draw down is going to accelerate obviously because that has already been announced.

[00:10:46]Now I did look at the commercial only that's minus the the US government strategic petroleum reserve and I didn't think taking an average and trying to extrapolate that out to to figure out how many weeks before we hit an operational minimum minimum level >> would be accurate because it is accelerating the commercial over the last eight weeks it has significantly accelerated. So the draw down rate for the last week in March, which is the the the beginning of this 8week period I looked at was plus 5.5 million barrels.

[00:11:22]This latest data from the EIA released last night is negative 7.9 million barrels and it has basically been a steady acceleration.

[00:11:29]>> Yes. So looking at the oil stock piles, there is the potential if that acceleration continues that we do start to see operational minimal or minimal operational level sooner than we might see from some of the distiller and and gasoline levels just because of the the the growing.

[00:11:54]Basically what's been happening here is that since the straight of hormones has been disrupted almost every buyer has turned to the United States and this has increased our our amount of exports of and of some other key exports too like jet fuel has been a big a big thing that that foreign buyers have been looking at and trying to purchase and based on the pad 3 data these are the refineries in the Gulf Coast they are running at very not quite 100% utilization but very close this is not really unusual during the summer travel season, but this does coincide with a similar spike at 97.4% utilization after Russia invaded Ukraine in 2022.

[00:12:35]>> And this is roughly a month earlier this level of utilization than it was last year. I think this is likely due to growing global demand for US oil and US fuels because these international buyers are shifting purchases from the straight of Hormuz to the to the Gulf of America.

[00:12:50]As we pointed out, I think more than a month ago when uh Jared and I presented that map of tanker traffic >> shifting from the Middle East to the United States. Now, what I think the most likely course of action here is is not a supply drain, but a price increase. And something that I have we've talked about over the last couple weeks, have reported on is that energy analysts and traders have been warning about the oil shock spreading west and that markets are not pricing in the true price of oil on the ground. And these same and many of these analysts have warned since last month that a price shock is coming.

[00:13:33]And and I think this is our most likely course of action is that we're going to see some of the we are going to see some of this price increase because SERT chief investment officer Mark Mik he recently in a post warned that the emergency oil reserve releases demand destruction from from increasing prices and and and lowering supply and the markets can what he he said the markets continue to embed an assumption that the straight of four moves open soon and cleanly are basically oing acting as shock absorbers that are holding back what is likely the true price and following the straight of form. He think he he believes that it is eventually going to reopen and I think it was we talked about before the show I I think this is this aligns with what you see the situation as.

[00:14:23]>> Yes. Uh, Robert, I think that it's guaranteed that the straight of Hormuse is going to open under some scenario.

[00:14:31]And if we look at Jeff Curry's analysis, uh, Jeff Curry from the Carile Group, his analysis is simplistic and it's it it's alarmist. So drawing a scenario, laying out a scenario where US oil refiners just operate their equipment until they reach uh the minimums and then uh don't have any plan. They just destroy their their their pipelines, their pumps, their storage tanks. That's a that's a simplistic, alarmist and and frankly ridiculous analysis. And I think that you know I you and I have agreement on this analysis here. And what's important for our viewers uh to understand is that the straight of Hormuse is going to open. Now how that happens I couldn't possibly say but all incentives align the Iranians all all the parties involved in the straight of Hormuse all incentives are aligned with it eventually opening up. Uh now what what is important for our our viewers is that yes pricing prices are going to go up.

[00:15:41]Gasoline prices are going to go up.

[00:15:42]Diesel fuel prices are going to go up.

[00:15:45]You know, the house isn't on fire.

[00:15:47]That's not going to be the end of the world. But yes, gasoline prices are going to go up because just like uh different analysts have have pointed out, the the even though prices have went up over the last two months, they're being managed in a way that the the current prices don't reflect the true scarcity of that product. So we have a we have a production deficit because we're not getting enough we're not getting the same amount of oil out of the straight of Hormus as as we did before and that's been partially offset by uh drawd downs in strategic reserves around the world not the least every every country with the strategic reserves has has done a draw down but there's still a gap there's still a gap between the draw downs and the deficit from supply and I believe that that that price prices went up, but it hasn't went up as much as it should have to balance supply and demand almost certainly through financial manipulations at the well various financial manipulations of the the federal government, for example, the Federal Reserve uh injecting money into these markets. We see that's where we see a a big discrepancy between spot prices on delivery uh can be significantly higher.

[00:17:03]For example, we saw $180 uh for spot delivery uh 180 for the the Brent price uh on on delivery just just last month where the headline number is something like was 110. Uh that that represents uh the difference between a financial instrument for a future delivery of oil and current actual delivery of oil. So we're we are going to see a price increase. It's not going to be catastrophic but because oil prices are set globally global buyers get influence on domestic markets and nobody is talking right now about uh the US restricts but that that's a silver lining this cloud is that even under some of the worst scenarios possible the United States could restrict exports which would uh it would keep foreign buyers from bidding on domestic uh distl It's a gasoline, diesel fuel, and that would offer some uh protection to US consumers on on keeping the price increases from going significantly higher, for example.

[00:18:12]We we're not going to see a double or triple of gasoline prices. Could we see another dollar or $2 per gallon?

[00:18:19]Actually, yes. I I do think we could see that, but we're not going to see $15 gasoline. So, some of these analysts are calling for for catastrophic scenarios.

[00:18:29]I just don't think that's going to happen.

[00:18:31]>> And on that that point about export controls. So the Trump administration has consistently even just within the last couple of days said that they are not going to implement export controls.

[00:18:42]And their their argument is that that would destroy any incentive for oil companies to produce more. Now I think a key question here is at what point would the Trump administration consider implementing key exports? I don't have an answer to that yet, but that is a key question that I that I'm keeping in mind when I'm looking at what the Trump administration is saying about this, especially going forward because for now at least, they have maintained that they do not want to implement any kind of export control, whether it's on oil or on fuels. I think that the US could make a couple of moves before it even talks about export controls. for example, uh an an extension a significantly longer extension of waiverss on Russian uh Russian distillate products and crude oil products. Uh even if the United States isn't a buyer of those products, uh it'll satisfy some global demand and that's that's going to help with the upside price protection. And then marginal marginal producers, for example, Venezuela. The United States has has still not ramped up uh purchases of Venezuelan crude. The Office of Foreign Asset Control, OFAC, is still very restrictive on on Venezuelan crude deliveries into the United States. There are uh there are mechanisms that the United States hasn't put in place yet to uh mitigate these these up uh these price increases. So we're certainly not in any kind of alarmist scenario there.

[00:20:10]There the United States policy makers under the Trump administration, they have policy tools that are available that they haven't used to to keep us from having a worst case scenario here.

[00:20:24]>> And thank you for that, Matt. We're going to move on to our regular report for today. The Senate is expected to vote as soon as today on a 72 billion reconciliation bill that will fund ICE and Customs and Border Protection.

[00:20:36]Republicans are trying to get this done uh by this week. As far as I can tell, the Republican leaders in the House and Senate are saying they would like to get this done before the Memorial Day weekend and before their recess their recess next week so they can get to that one June deadline set by the White House. Now, there is a possibility this does get disrupted, especially after the recent primaries where the Trump backed candidates have defeated some incumbents, especially in the Senate with Senator Bill Cassidy and now Trump coming out and endorsing Attorney General Ken Paxton in the Texas Senate primary against Senator John Cornin.

[00:21:11]There is some potential here where of Senate Republicans disrupting the passage of this bill, trying to strip some things out. We've already seen them a push to strip out the east wing ballroom funding and your service funding. So, I expect that there will be some there will be possibly some delay tonight on the the Senate vote for this bill. I don't I I think it's unlikely to pass cleanly and and quickly. Over at the Department of Justice, the DOJ unsealed an indictment against former Biden era DOJ prosecutor Carmen Mercedes Linberger. Uh, allegedly, according to the indictment, she illegally sent herself a copy of special counsel Jack Smith's report on allegations against President Donald Trump. And she also attempted to conceal her actions by renaming the files to appear as innocuous emails, apparently dessert recipes. So, why would she take these documents? I think the likely plan I think I think there there's likely some element of this where this DOJ former DOJ prosecutor believed that the files were going to be destroyed or or and there was some some need to keep them for perpetuity. Um but I think likely there was a plan here to hold on to some of these Trump investigation documents with the idea of bringing them back to a 2029 Democratc controlled Department of Justice.

[00:22:33]There's also the possibility that she planned to give the Democratic party these documents or the the at least the volume that has been sealed by a federal judge for messaging purposes ahead of the 2026 or 2028 elections.

[00:22:47]Over at the White House, President Donald Trump said could issue an executive order to bolster AI cyber security as soon as later today according to people familiar with with the plans. And this order would revamp existing cyber security information sharing programs with AI developers.

[00:23:03]The original talk about this EO was that it would impose a uh mandate a federal approval for any of what are called the frontier LLM models like anthropics mythos. But this had this allegedly will stop short of that and said we'll have voluntary government testing to find and patch weaknesses across federal local and federal state and local government networks which I I think is in line with what we've seen from some of the Trump officials talking about anthropics mythos AI model. They have been trying to get a hold of it and expand its use within the Trump administration in order to find some of these cyber security weaknesses in federal government networks. Moving over to the domestic side, Rhode Island District Court Federal Judge Mary McElroy called for any party subjected to a Trump DOJ subpoena to attempt to block the DOJ's efforts. She said the DOJ should be prepared to field thousands of motions to quash, tens of thousands maybe. And she accused the DOJ lawyers of forum shopping by seeking rulings from Texas courts. This is in a case where the Trump administration is trying to get anonymized records on child transition surgeries and and care from a Rhode Island hospital. So, first of course, many of these district level judges have been engaged in what amounts to a political resistance against the Trump administration. This was most visible as we covered the entirety of last year on immigration.

[00:24:27]However, I think this is a significant escalation of a judge openly calling for maximalist resistance against Trump Department of Justice efforts. Second, McElroy is is likely right that the DOJ has been form shopping. This everyone basically does this. They're trying to get the most favorable judge for the ruling they want. And this is common.

[00:24:49]But I think this is a what's important about this is that this is a likely indicator among other statements I've seen from district level judges over the last year that the Trump administration is actually being pretty aggressive with the district courts rather than what I've seen some of the narrative that the Trump administration is just letting the courts step all over them all over the Trump administration's agenda. I think is actually the opposite is happening that the Trump administration is aggressively pushing the line with the district level courts because they expect to win much more often at the circuit in the Supreme Court level. And I think this is also bolstered by some of the other behind-the-scenes actions we've we've reported on the Trump administration taking on certain policy priorities like immigration, making agency and regulation moves on visas, the the banking executive order yesterday that are intended to chip away at the Trump administration's agenda in ways that I think they are they are structuring it in a way that the courts aren't really in a position or have the the jurisdiction to to interfere With moving over to New York, the New York State Assembly Speaker Carl Hasty, a Democrat, said that New York Democrats plan to pass two state constitutional amendments that will allow them to engage a mid-deing ahead of the 2020 election. The first is going to amend the state constitution to allow mid-deing.

[00:26:12]And the second is going to change the composition of New York's independent redistricting commission.

[00:26:18]Now I think on that second point obviously they are they are going to try to change the composition to get a more favorable map for Democrats because there have been mid decade redistricting attempts or there have been extreme gerrymander attempts in New York in the past. So in 2022 they actually got their map slapped down by a state level court by the state I believe the state supreme court. They don't call it the Supreme Court. They call it the state court of appeals is their highest court in New York. Uh saying that it was too biased against Republicans.

[00:26:53]And so clearly this is a move positioning them to try to get a more maximalist gerrymandered map ahead of 2028. I think this I think we're going to see this in many more of these blue states, especially ones that did not or were not able to do mid-deing before this year's election. So, this is really just the beginning of this next phase of the Democrat versus Republican redistricting war. And I expect that it will become much more aggressive as we get clo as we get to the 2028 and 2030 elections because, as I said yesterday, Democrats are facing potential strong structural obstacles with the 2030 census. are already set to lose at least 12 seats due to aortionment, and that's just due to interior immigration.

[00:27:42]Now, changes that the Trump administration has been pushing to make to the 2030 census could actually cause them to lose more than that dozen seats in electoral votes. So, I expect they are going to ramp up their their aggressive moves on redistricting ahead of the 2028 and 20 and 2030 elections.

[00:28:00]Over in Minnesota, Trump administration officials, including acting attorney general Todd Blanch and HHS Secretary RFK Jr. are scheduled to make an announcement on a major law enforcement action involving fraud. This is all this press conference is also going to include officials from the National Fraud Enforcement Division, the FBI, the Centers for Medicare and Medicaid Services, and some other federal agencies. Uh I didn't see any further details on what they are exactly going to announce, but apparently there's going to be a big announcement on on a major law enforcement action. And they have already been conducting these fraud investigations. This was a big part of Operation Metro Surge.

[00:28:38]And they have been racking up these indictments and convictions over the last the DOJ in Minneapolis over the last couple of years because this has been a long-term project for the DOJ.

[00:28:49]Moving finally over in the homeland operation side, there was an interview yesterday with White House borders our Tom Hman and he said the Trump administration intended to incentivize illegal alien deportations, self- deepportations from the very beginning.

[00:29:02]And he added that Homeland Security Secretary Mark Wayne Mullen has committed to releasing ICE and CBP deportation data more regularly with the idea of increasing in transparency.

[00:29:13]I think in reading through this the the transcript for this interview, one of the key points I think here is the Trump administration is Homeman has reiterated that the the worst of the worst messaging is just that it is messaging. He the the Trump administration continues to conduct collateral arrests.

[00:29:36]Now, I think part of this is also that the Trump administration coming in in January 2025 is facing obstacles that previous administrations did not. And that is the the rise of these sanctuary jurisdictions. And in parallel with the increase in 287g agreements we've seen in the from the Trump administration, I think in the latest week it's over it's 1840 287g agreements. There have been states pushing back, some of these Democratic control states pushing back and blocking 287g agreements with state and local law enforcement.

[00:30:13]Now, what I think could happen here, and this is something that Tom Hman touched on in this interview, is that when these states start to roll back 287G agreements, I think we are going to see surges again. Now, I don't think we're going to see named large operations like Operation Metro Surge. What I think we're going to see likely is something like the Operation at Large that we have covered a few months ago that the the Trump administration ICE is going to start going to smaller but more persistent surges of agents into states and it's going to be focused on these states that do that try to roll back to A7G agreements. and he he clarified in this interview that that's what he meant when he said that they were going to surge in New York if Governor Kathy Hokll signs this a state level bill that's in their legislature right now to to effectively ban 287G agreements. So I think this is a likely indicator that we are going to see, especially if this aligns with the passage of this ICE and CBP funding bill this week, a push into some of these states on the basis that they are rolling back 287G agreements.

[00:31:24]All right, that's the end of our domestic side for today. Jiren, if you could come on and take us through the global sit, please.

[00:31:30]>> Absolutely. I'm also going to bring Matt right on because we are going to talk about Siloa right off the top. So, the US sanctioned 12 individuals and two companies yesterday as part of the effort to disrupt the Saloa cartel's fentinel trafficking activities. And Matt, you said there was a piece in here about uh crypto that stood out to you.

[00:31:48]>> Yeah, absolutely. So, uh first of all, we're continuing to see these Homeland Security Task Force that we've that we've covered uh on on many different stories. Uh they're they're the ones driving these these indictments. And we saw that the the Department of Treasury's Office of Foreign Asset Control added six Ethereum crypto wallets to their SDN, their their specially designated nationals list. Uh that's relevant in that all the all the people and businesses that were associated with those wallets can now be investigated and charged. So, with this announcement of of the indictments and and uh the sanctions being placed on different lists, we're going to see an expansion. Look, look for an expansion.

[00:32:36]Honestly, uh DOJ has probably already almost certainly already already done preliminary investigations and we're we're just going to continue to see more and more indictments coming out of the SDNY, the HF, HF, uh the Homeland Security Task Force.

[00:32:53]This is all related to a broader push in Mexico. We're you know it came out withments of Governor Moya was was the big headline and all of this is in in my opinion in this analyst opinion is a broader push to for the United States to to gain more influence in the Mexican domestic situation. It is clear to me that the United States is prioritizing anti-cartel operations absolutely above everything else in Mexico and these these indictments are just giving us uh more and more influence over over the political situation in Mexico. I think this is almost certainly tied to the Governor Moya indictment and we're going to see uh be be on the lookout for more indictments related to these six Ethereum wallets uh moving forward. This could this this is almost certainly going to lead to Governor Moya's arrest.

[00:33:56]eventually he will be uh extradited to the United States and we need to be on the lookout for how President Shinbal uh wants to play this. If she wants to continue to defend Governor Moya and her allies in the Marina party against indictments in the United States, that doesn't that that's not that doesn't look good for her administration moving forward. And you and I have talked about this before. Uh, President Shambal is in an extremely difficult situation. On the one hand, she is she she's facing pressure from the United States across the board for these for these anti-corruption anti-cartel operations.

[00:34:37]And then on the other hand, she is facing a security threat from these cartels. So the Mexico story is is continues to to take up a lot of our attention here in that it affects it affects our border regions. There there are cartels all throughout the United States and the United States is uh continuing to to target these these fentanyl. There's a large fentanyl distribution network in the Cenoloa area and we're going to continue to see arrests and be on the lookout for more indictments related to these six Ethereum wallets.

[00:35:14]>> Thanks for that, Matt. I'm going to leave you on because you got a few more comments around the rest of the items.

[00:35:19]So, uh, coming out of the secret out of the State Department yesterday, Secretary of State Rubio said that the US would not allow criminals and drug traffickers to overthrow the government of Bolivia. Uh and this this we we noted yesterday. The US previously described the protest as a coup attempt backed by organized crime. And this may be the first first response we're seeing in uh to the America's counter cartel uh coalition from the cartels.

[00:35:49]Additionally, the US had a pretty major day yesterday dealing with Cuba's Independence Day. They released several targeted statements at the Cuban people with anti-Cuban government messages. The White House's statement in particular included that they would not tolerate a rogue state harboring hostile foreign military intelligence and terror operations just 90 miles from the American homeland. And this was immediately after invoking the Maduro raid and the fear it should have instilled in Havana. Additionally, the US unsealed the indictment for former Cuban leader Rahul Castro and four other officials for the murder of their words for the murder of the of four Cuban expats in 1996.

[00:36:29]Now I I think obvious obviously here info and legal operations are kicking into high gear. We're seeing a massive ramp up in in what the US is trying to do. Now, this I think the US is obviously trying to get the Cuban people to accept a regime change or at least acquiescence.

[00:36:46]>> Now, the there are military assets in the region, but they are not currently on station. I have the map up here for those that can see it. They they've been uh primarily staying in the southern part of the Caribbean, not the Caribbean, up by the arm of Cuba there.

[00:37:01]That said, due to the proximity of both the forces that are already on station and the fact that it is just 90 miles from from the United States, uh that could change very quickly, perhaps even quicker quicker than uh we could actually establish much warning. So, I do think first off, I don't think that this is going to happen anytime while the Iran war remains unsettled. There has to be either a permanent ceasefire and deal non-uclear deal established or the Trump administration basically forces Iran into not being able to access that material before it can move on. But I think that the US is going to aim to achieve regime acquiescence at a minimum before the end of summer. This is I I uh actually Matt you said here to be on the lookout for either US delegation to visit Cuba or for negotiations for a transition of power.

[00:37:52]The President Trump himself said that the CIA is operating in Cuba and we've seen the CIA recently say that well they sent the director down there to speak directly to the minister of inter of the interior. So uh yeah there are likely already some operations on the ground that are non-military in Cuba. Well, first of all, I want to toot uh our analyst shops horn a little bit here. I believe Tuesday that we did call be on the lookout for the indictment of R Castro and here it is uh immediately happening. So, uh I want to I want to toot the horn of my analysts here. We're we are calling this out correctly. Um the Raul Castro indictment is is is very important in that it establishes a legal a legal predicate for the US to do future military operations inside Cuba.

[00:38:42]So uh the Royal Castro is alleged to have been involved in the deaths of of American citizens. This is uh something I like to call it starts the music. So the United States has a playbook. it uses it over and over and we're seeing these these moves being put in place before regime change operations. Now whether that is economic, voluntary or military, we we don't nobody knows the future. But it is very clear that with the moves and the United States is absolutely focused on regime change in Mexico. I think your analysis is wait Cuba.

[00:39:23]>> Oh, pardon me.

[00:39:26]regime changing Cuba, pardon me. Uh we we are absolutely motivated the the the US Trump administration is absolutely focused on regime change in Cuba. Uh I think your analysis is correct. This is not this is not the number one item on the US's to-do list. Obviously, Iran is is is got more of our focus, but we see with with Secretary Ruvio's comments about Bolivia, the continued uh activity in Mexico, the United States has the bandwidth to cover all of these countries at the same time. Not at the same attention level, but yes, within the next 90 days, be on the lookout for a a voluntary regime transition in Cuba.

[00:40:18]We it's not confirmed, but that's absolutely the direction that things are moving right now.

[00:40:23]>> Yeah. One last note, the the US um we talk about under secretary of foreigner policy KBY here a lot because he literally wrote the book on this. He did call for a back in his book in 2021, he did call for a sequence of operations in order to address national security threats for the United States. Cuba would be on that list. I fully expect Nicaragua to be to follow shortly behind. Um it doesn't necessarily has to be have to be directly behind, but Nicaragua is going to be on that list.

[00:40:52]They cannot >> absolutely >> cannot remain anti-US in this hemisphere as long as the threat of a 2027 war in the Pacific remains. And on the note of that, um now the president Xi over in China met with President Putin. He hosted him from Russia. And as expected, they they did release numerous statements about what a multipolar world looks like, the unending friendship that they would have. Uh but one of the key issues that that China is facing is they need to establish energy basically uh an energy network and Russia's a key energy producer. there has been a pipeline that's that would significantly enhance China's energy stability in the long term particularly if there is a blockade that is given on them uh that it failed to materialize it many China analysts and Russia analysts were expecting that to be a major win for China and it just they could not come to an agreement on price or the construction timeline and even I kind of expected them to actually come to this because from from what I'm seeing what the uh with the slowdown in military operations around Taiwan with particular particularly the sorties that they're flying around Taiwan uh and the slower throughput of oil coming out of China with a for a short period of time even a total stoppage of exports that this to me China appears to be under severe energy constraints and I expect them to to move on getting gas because they're not getting very much oil and gas out of the Middle East right now at all. Yes.

[00:42:30]>> Um that said, the pipeline has been stalled for several years. It appears it will remain stalled for for the foreseeable future. If there is an update on that and something that actually enhances China's ability to conduct a war, obviously you'll hear it first hear it here first.

[00:42:44]>> Well, just like just like we were discussing, Robert and I were discussing earlier today, US uh u energy uh energy majors, they have constraints. They have capex constraints. We might want oil out of the ground today, but it takes months and years to develop this. And Russia and China face those same constraints.

[00:43:08]Obviously, China wants more energy today. The Russians want to sell more energy today. But I don't I'm not aware of even one shovel full of dirt being broken on this pipeline. And from the moment that they decide to build it, it's obviously going to take years for them to build it. So while the straight of Hormuse is obviously today's hot topic and it is creating a supply deficit for China, >> this pipeline would solve a lot of those problems. But it's even even if they decided to break it today. Yeah. Yeah.

[00:43:40]It would be it would take at least two to three years at breakneck pace to build this pipeline. AB >> absolutely. And I just for clarification I am not saying that this would be like oh magic here we go pop here's your pipeline. Um but it would provide them an overland option that is in a stable a stable set of regions. It would go Russia, Mongolia, China.

[00:44:00]>> Yeah.

[00:44:00]>> All of which show show strong signs of stability for the foreseeable future.

[00:44:05]That's that cannot be said about the Middle East in particular getting that route from which has to be maritime.

[00:44:13]>> Yeah.

[00:44:14]>> Coming out of the Middle East and that's entirely subject to the US's Indoacific Command which would be conducting the war against China.

[00:44:22]It's a massive vulnerability in the pipeline would it it is necessary for them to actually have some kind of energy input.

[00:44:28]>> Yeah. Unfortunately for them that you know they face the same construction and and infrastructure uh bottlenecks that we do. I'm sure they wish it was open today and like you said at the summit they didn't even agree to start construction. So from from whatever date that they do agree to start construction several years from then the gas would start flowing.

[00:44:48]>> Y >> All right. Well, thank you that for that, Matt and Jerry, before we get to questions, I did want to address this comment. I think he said we could call him Fox rather than >> uh that name. Yeah. Um uh well, >> I Yeah. What I what I'm This is This is in other topics I've covered here like biocurity. One of the things I am concerned about is basically getting our audience overly concerned about something that is not as concerning as it should be and not having them as concerned about things they should be concerned about. In this case, I think there are concerns here, especially on prices. Now, going back to Mark Mik at at uh his analysis that there is going to be an opening of the straight moves. One of the things he points out that I do think is important is that he he his argument is that once the straight reopens, there is going to be a hard price for it is going to be above what the the lower prices that we've experienced in the last couple of years. And that's going to be because all of these countries that have committed the the 400 plus million barrels uh from their petroleum reserves, including the United States, are going to be scrambling to buy up and refill those reserves. So prices are I want you guys to have the best information I can provide on where I think prices are going to go.

[00:46:13]Now, when it comes to shortages, I don't want to completely dismiss Jeff Curry's argument because it is a possibility that if we saw a sustained peak draw down of distillates of of gasoline, of oil, that we do hit a an operational minimum.

[00:46:34]Now on that timeline I think I I think the key assumption he's making is that there is a peak that is maintain that that peak level is maintained. I don't think that's likely.

[00:46:46]It's a little bit harder to say with oil because right now the draw down rate as I said is accelerating and I don't want to give an inaccurate picture by trying to find an average and extrapolate from that. So, I'm waiting to see where that goes further in the future to see if this is a the acceleration is a trend or we've we're we're heading towards a peak in a slowdown in the near future.

[00:47:13]Now, one of the things that Jeff Curry does point out that I think is important here that aligns with the other analysis from experts, oil industry, oil traders, oil analysts that we've reported on is that he says the market is not really paying attention to what's happening on the ground. And I think that I think that part of his analysis is absolutely accurate. I the, as we've covered previously, some of these analysts have said that that that this price shock is because the markets are paying more attention to what the Trump administration is saying about the oil picture than what is actually happening on the ground. And this follows uh one of the one of the one of the accounts that I that I follow, the Kobesi letter, they put out this Trump playbook we talked about a couple of I think a month ago is that the the markets look at what Trump is saying because he uses it as a strategic tool for foreign policy.

[00:48:12]And in this case, I think I think Jeff Curry that that part of his analysis is likely very correct.

[00:48:20]I just wanted to make sure that you guys weren't panicking over gasoline running out in five in in in less than two months.

[00:48:32]Now, the the motor oil stuff, I think that is a different situation because we are so import dependent on that. And I also wanted to make sure you guys when I as soon as I saw that a couple a couple weeks ago, I wanted to make sure you guys had that because that is our objective here is to give you intelligence that you can operationalize, right? You are in in this this subscriber provider relationship. You are the decision maker and we need to provide you with the best intelligence possible. All right. Now, we're going to move on to questions and answers. If you could pull up our first question, please sh Jared from Mike Tarkington on the YouTube side. Iran seems to be begging to be told to go out back and cut a switch. Uh if you're from the south, many such cases. I would like to not see big army boots on the ground. What do you think the chances we can avoid that are?

[00:49:19]>> Well, uh there has to be army assets in place in order to actually do that. And I don't think I haven't seen those move in yet. I I think the I think realistically if there is a failure of the ceasefire, if they do not get a deal, what we're going to see is a renewed set of strikes in order to just continue to bury continue to bury the uranium, basically maintaining the blockade and pro frankly uh I don't I don't think it's impossible that we see an elimination of what's left of the Iranian leadership just to cause further command and control issues inside out of Iran. That way they can't have a unified response.

[00:49:58]>> I have a comment here.

[00:49:59]>> Yeah.

[00:49:59]>> Um yeah, so I was part of the invasion of Iraq in 2003. I deployed uh with the Marine Corps. There was there was a a 90-day buildup of of ground troops, not counting the logistics that went into the region. There is a 0% chance of a conventional largescale invasion of the United States into Iran in the next 90 days. we have not seen uh the tens of thousands, the hundreds of thousands of troops, the massive amount of logistics that are moving into the region. So 0% over the, you know, less than 1% over the next 90 days of a of a largecale invasion. Could we see special operation raids? Could we see more bombing? Almost certainly we're going to see more bombing. Uh that's you you know, look going back to last year. Uh this year there's been bombing. So we are going to continue to see it. almost certainly going to continue to see bombings, but uh maybe maybe special operations raids that's possible, but large scale large scale boots on the ground not going to happen. All right, thank you for that Jared and Matt. Next question, please from the from Fox, the Economist said between 250 thou 250,000 and 450,000 Russians have died in Ukraine war. Do you all consider this terminal for Russian hard power for the rest of the 21st century or will missiles make up the difference?

[00:51:16]>> First off, no. Missiles. Missiles cannot make up the difference for infantry. I I was the missile guy on the ship. I love missiles. Lived lived and breed them for almost a straight year. I'm telling you right now, anybody that tells you missiles are these wonder weapons that change that just utterly change how everything f No. No. You will always, always, always need a soldier on the ground enforcing whatever law you're trying to enforce there. That is just how war operates. That said, I do think Russia is going to face a pretty severe severe limitation here. Now, normally I would not come comment on the Russia China or sorry, we'll talk about that in 15 years. Uh the Russia Ukraine war uh the Russia Ukraine war because frankly it's been in a stalemate. That said, I do pay very close attention to the Latin American situation. And I've seen out of Colombia. I uh believe Cuba and Venezuela have all said that they are seeing Russian recruiters taking their taking their guys and sending them over. That to me says Russia is experiencing pretty severe personnel personnel shortages. There was also several reports, I think it was last year, about Indians getting basically scammed into it. um that yeah, Russia is going to have a hard time fielding an army if they are reaching out to basically non non-participants, people that don't have don't have a dog in the fight at all.

[00:52:46]>> Now on now missiles obviously cannot make up I but I think there's a there's good the obvious question here is what about FPV drones? My thought on it is again not going to replace infantry, right? But it is, I think, clear by looking at what's happening in Russia, Ukraine, that they are an enabler.

[00:53:04]They're they are a significant enabler.

[00:53:06]I think we're going to see much more often in conflicts, especially peer nearpeer conflicts in the future >> because as far as I could tell, some of what I've paid attention to Russia Ukraine recently is that there are parts of basically the front where smaller infantry units are able to control exercise control or block areas much larger than they would traditionally because of the use of FPV drones. So I I do think that that is probably a bigger piece here than missiles, but it is still not going to replace the utility of infantry even in a pure nearpeer conflict.

[00:53:42]>> Yeah, absolutely.

[00:53:42]>> I'll just I'll chime in here. Uh I total agreement with the rest of the shop here. We can go all the way back to uh General Curtis Lame in World War II. Uh people that want to talk about bombing and missiles, do they have an effect?

[00:53:57]They absolutely have a kinetic effect.

[00:53:59]But uh if you want to talk regime change, we didn't bomb Venezuela, you know, we went in and grabbed Maduro. So if you want if you want to have real change on the ground, it takes it takes that all the way back to the beginning of warfare, it takes a guy on the ground. Uh that being said, does this is this terminal for Russian hard power uh for the rest of the 21st century? You know, I I I think that the only reason we cover uh Russia, our our focus here at Forward Observer is to provide our customers with information that they can make decisions off of. And when our primary focus on the on global on global uh the global situation is the great powers. So that's the United States, China, and Russia. And I put them in that order on purpose. Russia is a a very strong regional power. They're a global power. Are they are they going to have hard power? You know, I would I would argue that the Baltics and the Nordic countries are absolutely concerned about Russian hard power. I think Spain is probably less. So, >> a little bit.

[00:55:12]>> Thank you, Jared and Matt. Now, actually, I want to go to this question next. Uh from Pale Horse Payeyton, have you heard about the Texas congressional candidate that is openly calling for concentration camps for conservatives?

[00:55:22]And what are your thoughts on this? Yes, I did see this actually. Uh and it's interesting to me because Democrats are claiming a lot of Democrats, including leadership, are claiming that uh I I forget her name. I think it's Galindo is her last name. Uh she's running for uh in the primary for a seat in Texas. and Democrats and Democrat leaders are claiming that this is she's being propped up by Republicans and by Republican political action committees.

[00:55:48]Uh and I did see her comments and if this is if that is true, if their accusations are true, this is actually a very politically savvy move by Republicans because they are trying to if that's true, assuming that's true, they are trying to get a very toxic uh general election candidate in place so that their candidate can win. Um, and and because I what I and the reason why I think there's some something to that to that accusation is because even the most extreme candidates that have run that have gone through into Democratic primaries uh that like we're talking your DSA backed candidates, PSL back candidates, they are savvy enough not to say things like this and especially in in such a public forum.

[00:56:37]Uh, so I do I do think there is some there is something there to the accusation that this candidate is being purposely propped up by a Republican political action committee. And this is sort of related to the the the Massie question that you started to bring up, Jared. Uh, what is your opinion of the Thomas Massie ordeal? Well, I think I think everyone is going to read into it what they want to as far as why Massie lost his primary. I think it's because President Trump still holds a major his his endorsement holds a major sway over the MAGA voter base.

[00:57:13]Now, I think the framework here that's important to to think about to think about this through is what I've talked about previously where in the United States, the two major parties are really pre-election coalitions and there's not really a way I think I forget the the Supreme Court case, but there's basically not really a way for the parties to control who joins the party and and that especially comes down to like who votes in primaries.

[00:57:43]But that also is part of the the one of the ways they can control their who the candidates is by endorsing or not endorsing giving financial support for elections. In this case, Thomas Massie pretty openly went against the Trump administration and and some key issues and the Trump administration wanted to punish him for it. And I still I still think it's funny that in the the the basically the home stretch he allegedly tried to tout an old like a four-year-old uh endorsement from Trump while also in in certain uh settings saying that Trump was protecting pedophiles by trying to block releases of the Epstein files and was trying to do this and that.

[00:58:34]And I think when it comes down to it, it really was just the Trump admin, President Trump trying to demonstrate that he exercises control, political control over the voter base.

[00:58:48]And he's done this in some other cases with like Senator Ben Cassidy from or Bill Cassidy from Louisiana. And in the endorsement, I think we're going to see this happen with this endorsement between Attorney General Ken Paxton and Senator John Cornin. And it, as I said yesterday, I think this is also an indicator, this combined with those Indiana Republican state primaries, the Trump back candidates beating incumbents in many of those, that the Trump administr or the the Trump faction of the GOP is expanding over the the establishment faction. Because as we we we started talking about this last year that there's really this this Republican civil war has been going on for a long time since 2016 and Democrats are also now really experiencing this after the 2024 election. I think this is one of those indicators uh this is this is one of those situations where we can kind of view who's in the lead in this this GOP intraarty war and I think all indicators point to the Trump faction. Now, some of the the unintended consequences here because we had some of these incumbents are going to remain in office until until next January is that Trump is going to run into some more obstacles in the Senate, possibly the House with Massie, even though he was already voting against some of the bills Trump wanted. But I think this is going to be more consequential in the Senate. All right, Jared, if you pull up our next question, please from Bad Wabbit expanding on Oh, sorry.

[01:00:22]from frozen nomad prerequisite question.

[01:00:24]>> Quoting energy analyst Duneberg will likely see an oil not too long after the Iran conflict ends. Doing a lot of drilling now probably just doesn't make economic sense unless the fields are very cheap to operate.

[01:00:35]All right. Uh and Matt uh basically yeah this is this is the situation as you have outlined that the timeline even the most accelerated timeline for new development is in the years and what the oil companies oil majors have said they're push back against the Trump administration is that they are uncertain that prices are going to remain high. So even if they were to start get expanding production, they're not sure they're going to make back their capital expenditures.

[01:01:08]>> Yeah. The uh the oil and gas majors are very conservative with their capital expenditure. I mean, they have a fiduciary duty to over a multi-year timeline. And that just doesn't match up with the Trump administration's need that look, the Trump administration needs gasoline next month. They need gasoline right now. that's just incompatible with the way that these that these projects move. That being said, I don't I don't see any kind of glut uh on on any anytime in the future because we don't see announcements of uh tens of billions of dollars of capital planned capital expenditures. So there there are no indications right now that there's been any ramp up whatsoever even in the in the next uh 24 months of of planned uh drilling operations. So on on that on that facet, I don't see a any kind of glut because we don't see massive amounts of of of new supply coming online.

[01:02:07]>> All right. And then Jared, if you could bring up the follow on question. I think it was from Bad Wabbit.

[01:02:11]>> Yeah, sorry. Uh, Frozen actually had two very large questions and I grabbed the wrong one. But yeah, the next one's about fertilizer and then >> has there been anything new on all the fertilizer stuff due to the Iran conflict and whether any fertilizer cargo has made its way out of the Gulf to ease a supply crunch. I have not seen an update saying that fertilizer is back to flowing at any significant level out of the straight.

[01:02:32]>> Yeah, I haven't either. I saw that a few ships were going here and there. Um, I think people are starting to realize that there is that route along Emirati and Omani waters that yeah, you can just go just turn your AIS off and don't let the Iranians know that you're going and the US Navy already said, "Yeah, we'll we'll protect you."

[01:02:49]>> We have started to see some of the dry cargo carriers uh come come out of the Gulf. uh last last numbers I've seen there are approximately 6 to 800 uh carriers that are still stuck inside uh inside the straight of Hormuse.

[01:03:07]So uh I haven't seen anything on uh on on a on a lessening of the supply crunch with fertilizer and that that uh projections are for US commodities agricultural commodities to increase in price 6 to 8%. So again it's not the uh you know it's not great for our farmers.

[01:03:29]It's not great for farmers around the world but this isn't going to double uh the cost of corn or wheat.

[01:03:35]All right, next question please, Jared.

[01:03:37]And this is from Bad Web expanding on frozen nomads question regarding fertilizer knowing we're going to have a refined oil shortage. What is your take on chemicals we're going to run short on? I know right now we're having issues find just finding slug killer. Um, well, that's a good question. We did we did talk about a couple years ago this this list of things that are dependent on import US dependent on imports for and on that list uh I believe were some uh many chemical precursors especially agricultural chemical precursors um I'm not sure about directly out of the straight of hormuz uh but there are likely going to be some rest some problems because of second on second hand second order effects and we can see that with the motor oil while Only about 40% of our imports come from come directly from the Gulf. 30% come from Asia and Asia is experiencing its own disruption.

[01:04:29]>> Yeah.

[01:04:30]>> Their their buyers which we then import from are experiencing their own their own disruption. So it's it's a compounding effect because of the second order impact.

[01:04:37]>> Um yeah sorry. Go ahead Matt.

[01:04:39]>> Oh yeah I was just agreeing with you Robert. I think that uh for example the the the motor oil that's a supply chain disruption. There is there is motor oil available. Uh unfortunately uh we're probably not going to see like a collapse of that where we where it's not available. We're going to see a price increase once the supply chain disruptions work their work their way out. Uh and again as far as shortages uh there are there are factories in Asia in China that have so the feed stock for all the all the plastic manufacturers there are there are supply chain disruptions there.

[01:05:16]This this goes back to we're we're we're going to see uh demand destruction. So plastic where where does plastic touch US consumers? Everywhere. So those those plastic prices are going to increase.

[01:05:29]Transportation prices uh transportation prices increase. All of that touches US consumers. That's me and you. Those products are going to be available.

[01:05:39]They're just going to be 10, 20, 30% higher.

[01:05:43]>> All right. Thank you for that, Matt.

[01:05:44]Next question. Jared.

[01:05:45]>> All right. Uh guys, we are at an hour and five and I have a ton of questions left.

[01:05:50]>> Well, there is there are um two things I want to address. Uh this this one here, I think this is in regards to that former DOJ prosecutor. It's not actually the Southern District of New York.

[01:06:00]>> This is for the um for the Solo Cartels. Why does all of the stuff regarding Latin America keep coming out of the Southern District of New York? Um >> oh and R Castro.

[01:06:14]>> Go ahead.

[01:06:15]>> The Yeah. So the the most recent the most recent indictments out of Cenoloa are they have a financial nexus and the way that the United States does these indictments is they use the US banking infrastructure. So that's how we get a nexus for transactions that are committed in other countries is that uh it it the nexus is the US bank and those US banks are uh primarily headquartered in the southern district of New York.

[01:06:41]>> Thank you for that Matt. And then finally what we're what we're going to end on is can the Trump administration separate California's gasoline problems from the rest of the US? Well, in some ways it is separated because I think as we pointed out when this construction first started, California, the East Coast gets fuel imports as well, but California is uniquely dependent on uh I think it's like 20% of their gasoline is imported.

[01:07:06]And that has to do with some of the moves that their state has made in the last few years that has pushed refineries out as has just in the last 12 months we've seen I think it's Philip 66 and Valero have ended both of their refineries in California that accounts for 20% of their capacity. So now they're facing a 40% shortage because they have 20% of their refining capacity is gone and 20% of their imports are disrupted.

[01:07:33]Now this is I don't think they can isolate it just to that state because when these two when Philip 66 and Valero warned that they were going to end they were going to end operations at these two refineries and all the other moves that the the Newsome administration and California Democrats were making. There were other states around them that are part of their fuel market that were warning that this is going to be disruptive to regional prices. So, while a lot of states that are that are really directly tied to like the Gulf Coast and Louisiana refineries for fuel supplies, some of the East Coast is not going to be as impacted, I think I don't think there's a way that the Trump administration I don't think there's anything the Trump administration could really do to isolate the impact from California in the region and and this is coming directly from the you know regulators and officials in those states in the west that they are going to be impacted by this.

[01:08:26]All right. Well, that that is the last question we're going to address for today because we're running a little long. We'll be back with you tomorrow on this show and in your inbox at 08 central. Have a good rest of your day and stay out front.