The Peter Zeihan Podcast Series - Impacts of an Israeli Strike on Iran's Oil Sector || Peter Zeihan

Episode Date: October 11, 2024

This video was originally released on Patreon 1 week ago. If you want to see the videos as soon as they come out, join the Patreon here: https://www.patreon.com/PeterZeihan Following my video on Iran's attacks from the other day, I feel it necessary to explore the possibility of an Israeli strike on Iran's oil sector and the affect it would have on global markets. Full Newsletter: https://mailchi.mp/zeihan/impacts-of-an-israeli-strike-on-irans-oil-sector

Hey everybody, Peter Zion here. I'm a geopolitical strategist, which is a fancy way of saying that I help people make sense of the world. And I deal with a lot. I deal with energy and manufacturing, industrial commodities, agriculture, finance, and on and on and on. As for the places, who, run to the gabbet. North America to the East Asian Rim. The East Asian Rim to the European continent, Europe to the former Soviet Union, former Soviet Union to Latin America and back again.

If you sign up for my pod on Patreon for a small fee, you not only get videos every day, you get access to our community forum where you can interact with me relatively regularly. And once a quarter, you will have the option of joining us for a live seminar where you can put your questions to me very directly. Anyway, love to see everybody there. join us on Patreon or wherever I happen to be. Everybody, Peter Zine here coming to you from the beautiful chaos that is Dallas Love Airport headquarters of South Mosed Airlines. In the aftermath of a video I've recently did on the Israelis and they're thinking in perhaps

striking Iran and specifically going after the oil sector, I thought it would be worth noting how that would hit a couple of things, most notably here in the United States. So Iran, their oil production has been suffering for years. Part of it is sanctions, but mostly it's because their regulatory regime is really punishing for would-be foreign investors. So they basically require that the state take a leading role in everything, and the state company is not very good. Most of the oil fields in Kuzistan are mature, require a lot of technology that the Iranians don't have and don't understand in order to make them produce meaningfully.

And everything else that is worth having is offshore, which and the Iranians are absolutely, no ability to operate offshore by themselves. So while the numbers that officially hit the market ebbed flow because of the sanctions regime and whether or not the Iranians are attempting to sneak around sanctions, the actual flow is about a million barrels per day of exports. Sometimes it's as low as 400,000, sometimes it feels a little bit higher, but about a million. Now, you remove a million barrels a day from the market, and we're going to feel it, but that is only So you would expect by itself in a purely market-driven environment, that to kick up prices by 10, maybe $15 a barrel.

Of course, because it was done by someone dropping a bomb on something, there would be a war premium on top of that. So the impact globally is going to be felt. It's going to be real, but it's not going to be huge. As for the United States, I'm really not concerned. The United States is no longer an energy import. We've come a long way since 2007 when we were importing something like 14, 15 million barrels. a day. Courtesy of the Shale Revolution of the United States is now arguably

one of the lowest cost producers in the world and our production is well over 20 million barrels a day. Moreover, the United States has diversified its economic strength and now is absorbing far fewer barrels. Now, if you look at the headline numbers, you're not going to see that

but that's because the United States Energy Department figures math a little bit differently from everyone else. We look at the amount of crude that. We actually, actually consume in total, including what goes into our refineries for product that is then exported. That's not how most countries do it. The argument of the AIS is that nobody consumes raw crude. It has to be turning into something.

So, you know, it's not stupid way to look at the data. But it does make it look like we are more dependent on international trade than we are. In fact, if you consider all the types of crude that the United States produces, raw crude, natural gas liquids, condensakes, we now have such a huge surplus that by the end of this year, the United States will be exporting 5 million barrels a day of refined product. And in the history of the petroleum era, there are only three countries that have ever produced more than 5 million barrels per day of raw crude, and we're exporting that much in refined product.

So just the degree to which the United States is insulated from this is robust. Now, do keep in mind that oil is an internationally traded product, and so there is a more or less single global oil price point because it is a easily exchanged commodity. But if we ever get to the point that there is an oil shock, I don't think that will happen with Iran, but if we ever get to the point that there is an oil shock, it drives prices to a point that the American president finds untenable. The U.S. President, courtesy of powers granted back in 2015, has the authority to summarily suspend all exports of raw crude. We do a lot of that too. And if that happens, the crude gets trapped within North America. We get a super saturated energy market, and then North American energy prices separate from global energy prices in a manner very similar to what has already happened with natural gas prices.

U.S. natural gas prices because of a similar glut in natural gas are, as a rule, one-fourth to one-eighth what they are in Europe or Asia. So if we ever do get into a situation where the crude price is sketchy, you can count on the American president, whoever it happens to be, to enact that power. And then all of a sudden we've got energy prices here that rarely will go above 60 because every shale oil field we have is cost competitive at that price. And everyone else screams right past 100, gone their way to 200 and more. Okay, that's it for me.

Of course, the biggest downside of being here, it is because it's Southwest Hub and it's open seating, you have to check in 24 hours online in order to get a decent seat. And because I was launching this new thing called Patreon 24 hours ago, I forgot. So I am C-51. I will be the sad person up against the bathroom, try to squeeze his lengthy ass six-foot-five frame into a middle seat that does not require. Pray for me.