The Energy Crisis: Downstream Impacts || Peter Zeihan

Added: 2026-05-05

[00:00:00]Hey, Peter Z here coming to you from Colorado. Uh yesterday we talked about what was going on with energy markets uh primarily in the upstream dealing with disruptions out of Russia and Iran. Uh short version, it's pretty bad. It's getting worse. Uh now I wanted to deal with things that are closer to the consumer where it's pretty bad and getting worse. Uh it has now been five weeks, which means that there's a half a billion barrels of crude oil that hasn't made it to market. The final tankers from pre-war shipments from the Persian Gulf arrived in all of Asia last week.

[00:00:36]The final tankers will arrive in Europe this week. And starting next week, the disruptions to from what the Ukrainians are doing to Russian oil exports will start to affect Europe as well. A mix of things here. Let's start with who's feeling what. Because of the shortages in Asia, we already have widpread rationing and the development of black markets. It's affecting different countries in different ways. So for example, India has gorged on the thin stream of raining crude that's coming out and the legalization by the Americans of Russian crude that is out and about and that has allowed them to avoid any sort of direct energy crisis as regards to oil and oil derivatives.

[00:01:21]However, almost all of their cooking, well I shouldn't say all but for about half the population, their cooking is done with propane liquefied petroleum gas that is exclusively produced for them in the Persian Gulf. That has gone to zero. And so now they're seeing an energy shortage in that regard. Uh places like New Zealand and Thailand and Taiwan and the Philippines and Vietnam are all experiencing degree of energy shortages and rationing already. The country that is most panicked and should be is Korea because their options are very very limited and they're a major industrial player. Japan at the moment is avoiding this largely because they have access to sources from the Western Hemisphere and a navy that can protect them if it comes to that. And at the moment the Chinese are okay, not because they're not experiencing energy shortage. They absolutely are. But China has an overbuild of refineries. And so part of their economic model was to build refineries, absorb crude from abroad, refine it into fuel, and then export that fuel. And so the way the Chinese have avoided an energy crisis is by stop exporting fuel. So at the moment, China is okay, but those fuel exports now have stopped arriving in various places. And countries like Australia and New Zealand, which used to get their fuel from China, their refined fuel, suddenly aren't. So we have a different sort of rationing and energy crisis. Uh in Europe, it's going to hit them from multiple angles, but they do have a little bit more time. Like I said, the last tankers from pre-war Persian Gulf exports arrived this week.

[00:02:50]So, it's only now that the crunch really begins. The problem will be in two or 3 weeks because they have this weird little setup where Russian crude can't be bought in Europe, but it's exported somewhere else, refined a product, then shipped back. So, we're now starting the fuse on that. And in 3 weeks, the Russians uh will basically be a non-factor in European energy. Uh at the same time, the Persian Gulf becomes a non-factor in energy. Uh and it's going to be a mess all around. Uh couple other things. Number one, there are more ships leaving the Persian Gulf. We saw 20 to 30 on both Saturday and Sunday, which brings up us to about 15th of pre-war levels. The difference is Oman, which is the country that controls the southern side of the straight. Last week we talked about how the Iranians had set up a toll booth system and were charging about $2 million per vessel and then kind of sort of escorting uh ships through the northern part of the straight of Hormuz in their territory. Oman's now doing the same thing in the south. Basically tankers, ships, whatever they happen to be are either reflagging or changing the transponders to say Omani owned. And Oman has always been kind of the neutral power in the Persian Gulf. The Iranians have always kind of considered it in a different basket compared to Kuwait, Bahrain, Gutter, and Saudi Arabia and the UAE, which are more in the American camp. So far, the Iranians have not targeted these Omani vessels. Uh, I'm not saying that they this is a safe path. It's not, but it has allowed some ships to get out. I will underline, however, that almost all of the ships that are using this route are leaving.

[00:04:28]Very, very, very few are coming in.

[00:04:30]Those that are are typically Iranian flagged using the northern route. So of the two 300 ships that were stuck in the Gulf before, some of them are getting out. Nobody's going back in. And that means that the oil production, even if it continued, even if it wasn't damaged, still has no place to go. Let's see.

[00:04:47]Finally, uh the big achievement of the Trump administration in this war so far in energy markets has been ending the sanction system on places like Russia and Iran. uh they've now lifted fully the sanctions on purchasing what's already on the water and that has allowed basically the last four or five years of attempts to isolate the Russians in the last 10 to 15 years of attempting to isolate the Iranians economically to vanish into the ether.

[00:05:14]Uh if there's going to be an effort by the United States or any other country to limit the legal access to these cruds um they're going to have to start completely over. So the last 5 to 15 years of efforts to kind of squeeze these economies is now broken. Now there's plenty of other things, physical damage for example, that are drastically affecting both of these markets, primarily the Russians. But it is interesting to say that it took a war launched by Donald Trump on Iran in order to make Iranian oil legal again.