What If The Oil Crisis Gets Much, Much Worse?

What if the global oil crisis gets much, much worse?

I’m not talking about another $10 move in crude. I’m talking about a genuine global energy emergency, where oil reaches $150 or even $200 a barrel, physical shortages begin shutting down meaningful portions of the global economy, and central banks find themselves confronting an inflationary recession.

I don’t think it is going to happen, but that I think investors would be making a serious mistake to dismiss the possibility entirely. The likely scenario remains some combination of restored shipping, emergency government intervention, reduced demand, and additional supply eventually stabilizing the situation.

But it must be noted…we’re in historically extraordinary territory, and I think it’s worth understanding just how fragile the situation could become if the next major development is another disruption rather than a resolution.

The easiest way to understand the problem is to think about how much oil the world uses and how little room there is for that supply to be interrupted.

Global consumption runs at roughly 100 million barrels per day. That oil powers cars, trucks, airplanes, ships, agricultural equipment, factories, and enormous portions of the world’s transportation and industrial infrastructure. It also provides the raw materials for plastics, chemicals, packaging, and countless manufactured products.

Under normal circumstances, this gigantic system operates almost invisibly. Oil is pumped out of the ground, loaded onto tankers or moved through pipelines, delivered to refineries, and transformed into the fuels and materials that keep the global economy functioning.

If oil cannot be transported from Saudi Arabia to a refinery in Asia, or if a refinery cannot obtain the particular crude it needs, that supply effectively disappears from the market until the problem is resolved.

And that’s exactly the kind of disruption the world has been dealing with...(READ THIS FULL ARTICLE HERE).

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