How crazy is the world right now? You don’t need me to tell you, not after you’ve spent three weeks straight in your house watching the world as we know it grow distorted like funhouse mirrors as you look out your window.
It’s actually even crazier than that if you’re in the hydrocarbon business. Despite producing the fuel that the world demands, in ever-harsher conditions, a certain subset of the population is actively trying to kill the industry by blockading anything it tries to build and starving it of capital. It is inconceivable to those in the industry that anyone would fight so hard to cut off the fuel supply that keeps them alive, yet we’ve become so desensitized to these insanities that we don’t really even notice anymore.
And just to show how bad that desensitization has gotten, consider what we are hoping to see this week. We are hoping that the world’s most dangerous and cunning dictator, a Mr. Vladimir Putin, will sit down with representatives of an incredibly oppressive regime that treats women more like pets than people and who, a scant few decades ago, saw a number of its citizens massacre US citizens on US soil without repercussion, and we are hoping that those two sit down with one of the craziest leaders the world has ever seen to hammer out a deal to prevent said participants from increasing oil production in a world that has seen 30 million barrels per day of demand evaporate in three months. (And that crazy leader is all that stands between us and an even crazier horde that has declared they will ban fracking, thereby handing complete control of their lifeblood fuel supply to the other two lunatics.)
You know reality is hanging by a thread when the future of North America’s main petroleum producers is in the hands of three testosterone-addled brains that would rather pull their own teeth out with pliers than do anything for the good of someone else.
But here we are. Without a production cutting deal, all three will keep producing more and more oil into a collapsing market until storage tanks around the world fill up and it becomes physically impossible for oil to come out of the ground anymore.
And even if this group of chimpanzees on meth do come up with a deal, odds are that the production cuts will be only a portion, possibly half, of the demand destruction we are witnessing. Therefore, we’re going to have to watch the world’s oil storage fill up, at which point oil will be shut in whether anyone likes the idea or not.
People are searching for answers these days, looking to experts for opinions on “what it all means” or “when will this all end” or “is this the right strategy”. It is quite probable that there aren’t any answers. Everyone from the heads of central banks to world leaders to medical experts are feeling their way through this one.
So don’t feel bad if you can’t figure it out either. Everyone has to take one step at a time and see where the paths lead. Perhaps we’ll be like China and get back to business fairly soon, which is probably a best-case scenario.
Above all, take heart that the petroleum supply – both oil and natural gas – are once again, like in World War II, products that are of critical importance to national security. The whole house of cards that is our global supply chain/distribution system rests on steady supplies of both. Remember that even if 30 million barrels per day of oil demand evaporates, 70 million barrels per day is still required, and that’s with global economic activity as slow as it can possibly go. As a part of that chain, focus on that – that you are part of the machine that is keeping it all together. Like being a truck driver, it is something to be proud of.