Conventional wisdom is that “high gas prices” are the result of the war in Iran, that they’re going to result in heavy losses for the Republicans in the midterms, and that the cost of living is going to remain high for the foreseeable future.
This consensus view, while not entirely wrong, is actually a simplistic and very optimistic version of events. The truth is actually worse than what conventional wisdom says. The truth is that we are now careening towards a potentially historic energy crisis — and solving it won’t be easy because it’s a physics problem, not simply an economic one.
There are a lot of theories about where this potential energy crisis is coming from. We just spoke to a White House official who posited one theory, which we’ll discuss in a moment.
Before we do, we need to establish that, as hysterical as it may sound, a full-blown catastrophic energy crisis could be on the horizon. In fact, that has actually become something of a mainstream opinion if you know where to look.
According to analysts at major financial institutions, including JPMorgan, we could soon realistically hit the operational floor for the global energy system. In the worst-case scenario, this could lead to the point where pipelines lose pressure, refineries have to shut down to protect their equipment, and gas stations run out of fuel to sell. No one ever talks about this, but as it turns out, fuel infrastructure requires a certain minimum amount of fuel to function. Think of it like your body — it requires a certain amount of blood running through the veins, or it will shut down completely.
When it comes to our oil infrastructure, that buffer is now in danger of failing. And it’s not entirely because of the war in Iran — which becomes clear when you realize that the vast majority of oil exports from the Middle East are sent to Asia, not the Americas.
But there is a supply shock, and we need to discuss it because the magnitude of the risk cannot be overstated. Every civilization requires energy to function. Without energy, we revert to the Stone Age. Look at what’s been happening in Europe.
Just a few years ago, Germany — the biggest economy in Europe — got rid of all its nuclear power plants. They shut them all down in favor of “renewables,” and they laughed at anyone — including Donald Trump — who said they were making a fatal mistake. Around the same time, Germany ran out of firewood — completely. The price shot up 100%, and then no one could buy it anymore.
Loggers put GPS trackers on their firewood because theft became so rampant. People began using wood chips in desperation. In neighboring Poland, instead of lining up outside the Apple Store for the latest iPhone, people began queuing for days outside of coal mines, hoping for some fuel.
This statistic sounds too insane to be true, but it’s real: Every year in Europe, more than 360,000 people die from “cold-related excess mortality,” otherwise known as cold temperatures (That includes many elderly people living in their homes, which don’t have adequate heating). That’s more than 8 times the number of Europeans who die from heat-related causes, which is pretty inconvenient if you’re a believer in “global warming.”
In the United States, by contrast, we only have around 1,000 hypothermia deaths per year — mostly drunk people who get lost in the woods during the winter. Even by the most liberal estimates, only around 40,000 Americans die annually for a reason that can be linked, in some tangential way, to cold temperatures.
Here’s another way to measure the distinction: in America, around 44,000 people die from gun violence every year, including mass shootings and suicides. That’s a whopping 12% of the total number of people who die in Europe every year from cold weather. So anytime you hear Europeans claiming that America is dangerous because of all the “gun violence,” tell them that Europe is dangerous because people freeze to death all the time.
These are numbers that are unthinkable in the United States. But if we continue on this trajectory, they won’t be unthinkable anymore. We’ve taken our energy production for granted. And that could be a fatal mistake, in a very literal sense.
Before I go into detail about how exactly we might see a failure of global energy infrastructure, I want to start with this communication we just received from a former White House official. I don’t normally share communications with Washington insiders, for the simple reason that I don’t know any Washington insiders. Nor do I have any interest in knowing any Washington insiders. Most people in conservative media go to great lengths to cultivate relationships in Washington. My approach is essentially the opposite. But this former White House official got in touch with one of my producers over the weekend, while talking about high gas prices. And I thought this statement was interesting, so I’ll pass along what the official said.
“It’s Zelensky. It’s literal Western civilization suicide. Europe and the United States are funding their own energy crisis.”
At first, when I heard that, it sounded like typical White House messaging to me. Obviously, they want to distract attention from the war in Iran and blame Ukraine for high gas prices. But let’s take the claim seriously for a second. This is footage of President Trump speaking at a golf tournament one week ago:
One day after these comments, Trump posted the following message on Truth Social:
“Ukraine has agreed not to hit Russian Energy targets. Russia has agreed to do, likewise!”
We have no reason to think Trump was lying about this. It would certainly be a strange thing to make up. Indeed, if true, it would be a major breakthrough. Ukraine has been bombing Russia’s fuel infrastructure — their fuel depots, storage tanks, pumps, and so on — for a very long time now. They’ve reportedly taken out roughly 1/3 of Russia’s refining capacity, which has led Russia to ban the foreign sale of its diesel — which is no small thing, since Russia is (or was) the second-largest diesel exporter in the world. This is why diesel is now more expensive than it’s ever been in recorded history, at more than $6 a gallon. Yes, diesel is more expensive than ever before.
How does this affect you? Well, two ways. First of all, pretty much everything you buy was transported on a semi-truck, a cargo ship, or a freight train at some point — all of which run on diesel. When diesel supply goes down, prices go up, and costs are passed along to you when you buy things at the grocery store, Amazon, or anywhere else.
Secondly, refineries outside of Russia are now “yield switching” to diesel to maximize their profits, meaning they’re refining less regular gasoline as a result (which drives up the price of regular gasoline). Remember, diesel and regular gas come from the same barrel, but many refineries are capable of switching their output to some degree.
According to Goldman Sachs, the price difference between diesel and gasoline in the United States is now over $60 per barrel, when it was just $3 a barrel one year ago. So there’s much, much more money to be made by refining diesel right now. And because refineries are already operating at full capacity, any effort to refine more diesel means that less gasoline will be refined.
That’s why global exports of gasoline have dropped 24% in the past year. Everyone’s switching to diesel if they can swing it. From March to August of this year, diesel yields in the United States are well above their historical averages, while gasoline yields have been cut. Meanwhile, demand for gasoline hasn’t gone down. In fact, it’s gone up, especially in Russia, since many of their oil refineries have been blown up.
So if Ukraine agreed to stop bombing Russian refineries, and allowed the world’s number-two diesel exporter to get back to refining diesel, that would be great news for the American consumer — unequivocally. That’s what Trump said was happening last Monday. But that night, Zelensky spoke to reporters and contradicted the president. He stated, “There is now a strong U.S. proposal for a mutual halt to strikes on critical infrastructure.” Zelensky added that “Ukraine is ready to support de-escalation,” but only if Russia would agree, in turn, to stop bombing Ukraine’s infrastructure.
Fast forward six more days, and Zelensky has clearly given up on the whole plan. He posted footage of burning Russian refineries, demonstrating quite clearly that Ukraine has actually doubled down on its strategy of destroying Russia’s fuel infrastructure. On social media, Zelensky then bragged about what he had done.
Our long-range responses had a very significant impact in the Moscow region last night. One of Russia’s key oil industry facilities and the aggressor’s logistics facility were hit. These are billions of dollars that sustain the war machine. … I thank our warriors for their accuracy: the Security Service of Ukraine together with the Unmanned Systems Forces, the Special Operations Forces, the Defense Intelligence of Ukraine, and the Foreign Intelligence Service. …I thank everyone who is strengthening Ukraine’s long-range capabilities. I am grateful to everyone who complements our long-range responses with responses through sanctions. Glory to Ukraine!
Remember when we were supposedly arming Ukraine with “defensive weapons,” and gave them explicit instructions not to escalate the war by bombing Russian infrastructure? Shortly before the Biden administration left power, they rescinded those restrictions. Apparently, under the Trump administration, Zelensky is happy to say one thing and do another. No one is stopping him. Now he is openly celebrating a military campaign that, in addition to raising the possibility of World War III in a very direct way, is also making day-to-day life much more miserable for millions of Americans. So why would he do that? Why in a million years would he dream of doing such a thing?
Let’s go through the numbers to provide some historical context. By some estimates, this year we’ve seen the largest surge in gas prices (in percentage terms) from January to the summer peak of any midterm election year in the past century. It’s not even close. Gas has now reached $4.48 a gallon on average, which is roughly $1.20 more than last year. The typical sedan is now around $20 more expensive to fill up compared with 2025. If you drive an SUV or a truck, you’re easily paying $30 or $40 more than you used to. You’re paying around 52% more for gas at the moment, compared to January.
The previous record in a midterm election year was dramatically lower — just a 27% increase in the price of gas all the way back in 2002. So we’ve doubled the previous record when it comes to the increase in the price of gas. This is uncharted territory in the modern history of this country. Don’t take my word for it — CNN brought out the nerd with the totally unnecessary smart board to tell you the same thing.
Watch:
That’s not even getting into the cost of groceries or heating oil — which is a pretty big deal for the millions of Americans who would prefer to survive the winter. Home heating oil prices just came out, and they’ve increased by around 75% year-over-year in parts of the Northeast — including in Maine, where several very important races are going to be decided in November. Control of Congress could very well come down to how people vote in Maine and, as it stands, it’s not looking particularly good.
In fact, it’s not even looking good in Kansas anymore, where Republicans have won every Senate race since 1932. The incumbent senator Roger Marshall was just booed by a large crowd at the state fair. The chair of the Kansas Republican Party, in an interview with The Wall Street Journal, is publicly asking national Republican groups to spend more money in the state — which is never a good sign. As the chair put it, “Kansas gets overlooked a lot because we are reliably red, but this is a weird cycle.” Yes, it’s a “weird cycle.”
Even taking into account that the incumbent party usually loses seats in a midterm election, this is shaping up to be a very “weird cycle” indeed. That’s very good news for Zelensky, who has obvious reasons to prefer a Democrat-controlled Congress.
Since the war in Ukraine began, Democrats have been pretty much unanimous in their support for writing blank checks to Zelensky. As recently as this summer, the House passed a $9 billion “aid package” for Ukraine by a vote of 226 to 195 — with near-unanimous Democrat support (the only ‘no’ vote was Ilhan Omar, who didn’t like the sanctions against Russia that were included in the bill). A grand total of 18 Republicans supported the aid package.
There’s no question that, for Zelensky, it would be very beneficial for Republicans to suffer a massive defeat in the midterm elections. He wants to flood Congress with Democrats who will vote to send Ukraine even more money. And one way to do that, of course, is to give Americans a reason to despise their incumbents. Destroying the world’s fuel supply is one way to achieve that.
By the way, even if you put aside the strategic political considerations, a lot of Democrats — by their own admission — want higher gas prices because they think it will hasten our transition to a so-called “green economy.” This has been a long-term ideological objective on the Left. You should keep that in mind whenever you see Democrats going on television and pretending to care about high gas prices. They spent the last decade telling us, again and again, that expensive gas was good for the environment. The Seattle Times even published an article during the Biden administration entitled, “High Gas Prices? They’re Just What We Need.”
The biggest paradox of the moment is Americans complaining about high gasoline prices while climate change is growing worse. … Carbon needs to be priced high enough to keep it in the ground instead of burning it into the atmosphere. This is essential to preventing global catastrophe.
The AP ran a similar article, quoting experts who said:
“[Fuel] prices that are high … have a longer term ability to cut demand, and … the administration wouldn’t mind seeing that.” [Another expert at Berkeley said, quote,] “High gas prices are ‘unequivocally’ good for fighting climate change because people use less fossil fuel and emissions go down.”
Just this year, the United Nations expressed excitement that the war in Iran would accelerate our transition to renewable energy. This is from Reuters:
The Iran war is ‘supercharging’ the world’s shift to renewable energy, as countries scramble to reduce their exposure to volatile oil and gas markets, the U.N. climate secretary said. … Early signs indicate the war, which began two months ago, is speeding up some countries’ low-carbon transition. “Renewables offer safer, cheaper, cleaner energy that can’t be held captive by narrow shipping straits, or global conflicts.”
This is a very long-term goal for the Left. And now they’re closer than ever to achieving it. Here’s the worst-case scenario for how this will play out. The main risk at the moment — even aside from the midterms — is that Republicans will embrace an emergency stopgap measure that makes the problem significantly worse than it already is. This is from Bloomberg from a few days ago.
Senate Majority Leader John Thune said he is “open to exploring” an export ban for diesel fuel as average national prices surge past $6 a gallon. … ‘We’ll be looking at any proposal that is a viable solution, but I do think if we have the supply in this country and we’re exporting it right now that might be one way of getting at it. … If that would take pressure off of prices, you know, I’m open to exploring it.” … Thune said an export ban “probably” makes more sense to him than suspending the diesel tax, an action recommended by Democrat James Talarico. … Oil industry executives have warned that while an export ban would initially lower prices for US consumers, it would ultimately backfire. Energy companies would likely respond by cutting crude production and fuel refining. Ultimately, prices for gasoline could increase 15 cents or more per gallon.
Meanwhile, Chuck Grassley just posted this message on X, where he attacks “Big Oil” and proposes more government regulation.
Big Oil is telling us we can’t embargo diesel. IF TRUE THEY STILL DONT [HAVE] TO MAKE SAME PROFIT OFF U.S. FARMERS AND TRUCKERS THAT THEY MAKE IN FOREIGN SALES … AMERICA FIRST.
So he’s also floating an embargo of diesel, or alternatively, some kind of price control on domestic sales of diesel.
This is exactly the kind of rhetoric you’d expect from Bernie Sanders or Elizabeth Warren. Here we have a government bureaucrat — someone who’s held political office for all 5,000 years of his life — saying private businesses “don’t have” to earn too much profit. Therefore, he wants to take over one of the most important markets in the world, which is the market for diesel fuel — where the United States is the top exporter.
Actually, Chuck Grassley, oil companies — like any other company —are entitled to whatever profits they can get. That’s not because they’re good people, or because they “deserve it,” or anything else. It’s because, once you let the government take over the market, then everyone will be totally screwed in very short order. That’s what always happens, in every single case, when government bureaucrats start implementing price controls — particularly in very complicated markets they don’t understand.
Has any Republican actually thought about the effects of an export ban, or price controls on diesel in the U.S. market? Do any of them remember the shortages and gas lines from the last time the U.S. attempted an export ban like this, back in the 1970s, which aggravated the shortages caused by the Arab oil embargo? Put aside how many problems we’d be causing for our alleged allies in Europe, who would have to go back to stealing firewood to stay alive.
Logically, if we impose an export ban (and price controls), then profit margins for domestic suppliers would collapse overnight. That means less diesel production and more expensive goods that you buy from Amazon (or anywhere else). And guess what? Gasoline, jet fuel, and diesel all come from the same barrel of oil. There are no “diesel factories.” If you manipulate the market so that diesel is suddenly unprofitable, they’re going to scale back on their refining — and that’s going to affect regular gasoline as well. It’ll affect the price of airline tickets, and so on.
It’s true that China has restricted diesel and gasoline exports — although nothing on the scale that Republicans are talking about right now. But there’s a catch: China has spent a long time ramping up its coal production as an alternative fuel supply. China now accounts for something like 50% of all global coal production, which they use for two purposes — creating synthetic natural gas and substituting for natural gas power plants. Meanwhile, our coal production is down something like 50% since 2008. That’s a big distinction.
At the same time, China has been pushing electric vehicles on its population, which naturally reduces the demand for gasoline. In other words, if we implement Chinese-style export controls, we’re running several risks that they aren’t taking. And no one in Washington, in either party, has apparently considered any of this.
Along the same lines, evidently, no one considered the fact that the Saudis have a very vulnerable East-West pipeline that stretches for around 750 miles from the east (where they produce the oil) to a port in the Red Sea. This is the pipeline they’re using now that the Strait of Hormuz is compromised.
For years, we’ve known that this pipeline is vulnerable to another chokepoint at the Red Sea, where the Houthis (terrorists from Yemen who are backed by Iran) are now using drones and missiles to disrupt shipping. They’ve just conducted a “lightning offensive” to seize a vital maritime chokepoint in the region, so the warlords are basically in control of shipping traffic in the area of Perim Island, which is how you get into the Red Sea. As a result, there’s now another problem to worry about: a shortage of tankers.
This is from The Wall Street Journal:
Drone attacks that shut Saudi Arabia’s bypass pipeline earlier this month have forced more crude back through the Strait of Hormuz and onto a tanker fleet already stretched thin. The impact has spread worldwide, as longer voyages and shuttle runs around Hormuz tie up ships and push the daily rate of hiring oil tankers to records. … The sudden supply crunch among oil supertankers—known as very large crude carriers, or VLCCs—has boosted the cost of hauling oil through the strait to the highest on record. Earlier this month, the cost of hiring an oil supertanker to load inside the Persian Gulf and transit the Strait of Hormuz topped $1 million a day, according to maritime-intelligence firm Windward. That works out to $26 a barrel, or roughly a quarter of the crude’s value based on the current market price. Normally, shipping costs are a fraction of the value of a crude cargo.
Somehow no one foresaw this development when the war planning was going on. We were told that Iranians would rise up and “take their country back,” but we weren’t told that there would be a shortage of oil tankers as well as oil in general.
While this might not be a big deal in normal circumstances, we’ve already exhausted our own emergency stores of oil. The strategic petroleum reserve was 638 million barrels when Biden took office and dropped to under 400 million barrels when he left. That’s a drop of roughly 40%. It was widely reported at the time as a betrayal because that’s exactly what it was. It was deliberate sabotage. By the time the Iran war began, the reserve was back up to around 415 million barrels — still a fraction of what it used to be before Biden.
Since this latest war began, the White House has announced plans to release around 170 million barrels, which brings the reserve down to its lowest level since 1983. Now we’re down to between 240 and 280 million barrels — which is significant because, according to the federal government, around 100 million of these remaining barrels can’t be deployed at all, for any reason, due to a mixture of “construction outages and cavern outages,” according to a government watchdog. So really, we’re running on fumes — there’s no backup.
That’s partly why even mainstream analysts — particularly JPMorgan — have been modeling a worst-case scenario lately. I’m going to read from one of their reports from May of this year:
If the Strait is not opened by September, global inventories could hit an operational stress floor of 6.7-6.8 billion barrels, after which demand destruction would occur at a faster pace, mostly in Asia and Europe.
This disaster scenario hasn’t come to pass yet because demand has been lower than they forecast. But it’s still a possibility — and more recently, in a note this week, JPMorgan announced they’ve given up on trying to predict oil prices, saying, “we simply don’t know how to model the endgame.”
What’s the “operational stress floor” of global inventories of oil, exactly? Here’s what it could mean in practice. Once oil hits the operational stress floor and stays there for a sustained period of time, it becomes very difficult for any buyer to purchase oil, no matter how much he’s willing to pay. That’s because pipelines, refineries, and storage tanks are not allowed to go below a certain level of oil. If they go below the operational limit, then the machines themselves break. The result, as JPMorgan put it, is “demand destruction.” That’s a polite way of saying “rationing.” The market can’t provide any more oil, so governments have to use force to prevent people from using it. The global economy would, in all likelihood, crash. Many people would die. Inflation would reach historic levels. We would enter, in all likelihood, an economic death spiral.
This is not a risk I’m inventing to get your attention. It’s from JPMorgan, one of the most established mainstream financial institutions in the world. Did you hear about this? Has anyone told you about this? Probably not, because if they did, then you’d demand solutions. An energy crisis is one of the worst things that can happen to civilization. We are currently careening towards one. To the extent our politicians do anything, it should be their number one goal to prevent something like this from happening. So what are they doing about it?
As far as I can tell, they aren’t doing anything. But that’s not because they don’t have options. The first thing they should do is tell Zelensky to stop bombing Russian refineries immediately. If he refuses — if he continues to lie to us while he brags about destroying Russian fuel infrastructure — then we should bomb Ukraine until Zelensky is removed from power. We simply can’t tolerate this anymore. He has taken billions of dollars foperarom U.S. taxpayers, and now he’s deliberately tanking the global market for diesel. It’s unconscionable. We aren’t simply wasting money on Ukraine. The return on investment has been overwhelmingly negative. We need to shut these con artists down immediately.
The second thing we need to do is end this ridiculous war in Iran. Some of us warned that the war would have this result when it first started. We were shouted down by many on our own side. But we were right. We’ve been proven right every step of the way. Now here we are. It has to end.
Next, we need to ramp up the oil exports from our newest puppet state, Venezuela. And we should make Manifest Destiny real and take over all the oil we can get in Cuba and Africa — which is significant. Then we should move on to Canada if we need to. Cuba and Canada are right next door. They’re all communist and dysfunctional. They’re not using their resources to any significant degree. We should take them for the good of humanity. The alternative is too unthinkable.
We elected this administration to come up with solutions like this — solutions to problems that could, realistically, destroy this country (and civilization itself). This is why Donald Trump beat Kamala Harris. She was talking about “racial equity” and making sure black people didn’t lose their Bitcoin or whatever. Donald Trump won because he said he would make life better for everyday Americans in a real, tangible way. He now has an opportunity to actually do that.
If he doesn’t — and if the GOP doesn’t — then they deserve everything that’s going to happen in November. We have one chance now to stabilize a situation that is rapidly spiraling out of control. We can take that chance, or we can become Germany or Poland — and instead of waiting outside the Apple Store for the latest iPhone or whatever, we’ll be lining up outside the coal mine, begging for some fuel, so our children don’t freeze to death.
It sounds unthinkable, but every great tragedy seemed unthinkable before it happened. Every great empire thought it was untouchable before the fall. And with every day this war drags on, as even alleged “conservatives” openly embrace the rhetoric of communists, our own fall — not simply the fall of the GOP, but the fall of the entire country and of Western civilization — becomes more and more likely.
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