The Energy War

Wondering what's really going on, and what comes next.

Atlanta, GA

April 21, 2026

Saturday we commemorated the anniversary of the Great San Francisco earthquake and subsequent fires.

This year, on the final day of February, another tremor struck. Or, rather, was inflicted. The epicenter was an unstable seismic zone half a world away.

But this shock came from above. The U.S. government’s sneak attack on Iran unleashed a potential economic calamity, perhaps precipitating global fuel shortages, travel restrictions, and widespread famine.

Like the “discovery” of a weird virus in Wuhan, the effects of this catastrophe were initially localized, and caused little fuss further afield. Outside China, life seemed normal. Commerce continued, markets pressed higher, and people kept making their usual plans.

Until they didn’t.

Within weeks, the germ spread, fear was stoked, and cognitive dissonance dissipated. Europe panicked, the Trump Administration freaked out, and markets collapsed. The world shut down, and would never be the same.

Damage is Done

The Strait of Hormuz is the new Wuhan, the epicenter of a calamity so big that few see it coming. But they’ll feel the shock before they know it. Perhaps within weeks, almost certainly within months. The waves are rippling, amplifying with each day the passage is closed.

But regardless when it opens, the damage is done. The last laden ships that left the gulf before the war have already reached their destination. In the Middle East, fuel storage is almost full behind the blockade(s).

Regional production has essentially ceased. There are no more carriers or tanks to receive newly extracted oil and gas. With no place to put what’s poured, there’s no choice but to close the tap.

When idle wells go offline, many are gone for good. Hydrology and geology can permanently clog disabled wells. Those that could restart can’t resume by simply loosening a valve.

But the effects are more extensive than that. Refining capacity and other energy infrastructure has also been destroyed. It would take months to resume prewar production even if hostilities ended today. Maybe that’s the idea.

And it’s not Iran’s.

I’ve tended to think of this war as another front in the battle for Greater Israel. No doubt it is. But what if it’s much more than that? Let’s step back, and look ahead.

Global Embargo

This war is obviously for the benefit of Israel, which is why they urged the action, egged it on for decades, and joined it when it started. But what if its main purpose is to contain China (many have made this assertion, but I’ve yet to fully explore it)?

This year opened with the Middle Kingdom receiving a third of its oil from Russia (17%), Iran (11%), and Venezuela (4%). More than half its natural gas comes from Australia (34%), Qatar (24%), and Russia (9%).

Under the guise of a manufactured menace called “narcoterrorism”, the US government invaded Venezuela and essentially annexed the largest oil reserves in the world. Heavy crude that China craved was re-routed to US Gulf refineries, leaving American light crude available for global export at elevated prices.

Within a couple months, the Trump Administration attacked Iran, prompting closure of the Strait of Hormuz and retaliatory strikes on the world’s largest LNG export facility at Ras Laffan in Qatar.

As this is happening, Russian refineries, ships, and export terminals suffer explosions and attacks, each attributed to “Ukrainian” strikes (which may be factual, but probably isn’t truthful). Coincidentally, last week the global contagion of refinery fires infected Australia, which suffered a major blaze at one of only two oil refineries still operating in that country.

Seeing the movement of all these pieces, the US blockade of Hormuz looks like part of a global embargo on China’s imported oil and gas, and seems to have been imposed because Iran’s gate wasn’t locked. With Iran unable to export oil, its storage facilities will soon fill, and Persian wells will also be capped.

Having lost reliable sources of fuel in Venezuela, Russia, the Middle East, and Australia, China, Europe, and the “Global South” become reliant on the United States, and have to pay for oil and gas in US dollars. The US government becomes the gatekeeper for global trade, and its currency the ticket for anyone wanting to enter.

Is this the “plan” Trump supporters insist we follow? The 5D, eleven-level, tri-polar, multi-party chess where the U.S. makes all the moves and everyone else gets rooked? Or is this bombastic president just the latest pawn in a Great Game among unseen players?

I don’t know.

My gut feel about this war is that (to adapt a quote misattributed to Talleyrand) the crime is heightened by being a blunder. It’s another impulsive outburst from an erratic president who should be impeached (removal is warranted for launching an undeclared war, regardless why its being fought). But having made that case in other essays, I wanted to consider other alternatives in this one.

Regardless, we can be sure that this incursion has little to do with “terrorism”, “Iranian nukes”, “liberating the Iranian people”, freeing women from hijabs, or any of the boilerplate propaganda used to sell war to the American public.

And that it’s a mess… intentionally or otherwise.

Effects Being Felt

As disruption persists, the radius of rising Richter readings continues to widen. Ireland is in an uproar, with protests resembling those of Canadian truckers four years ago. Australia and New Zealand are running low on fuel, including diesel needed to transport food.

The US benefits by being a major oil producer. Yet while the states are net exporters of all petroleum products, they remain net importers of crude. America doesn’t produce the heavy crude needed for diesel and jet fuels (among likely reasons for the Venezuela larceny). Gulf oil refineries are built for this thick sour goo (most coming from Canada), which they convert into gasoline and diesel that can be sent overseas. US petroleum exports rely on US oil imports.

American diesel inventories were dwindling before the war. The US hadn’t built a new refinery in half a century (one is finally being built now), while the total number was cut in half. California, which has been especially hostile to the engines of civilization, now receives 70% of its diesel from overseas.

The push to reduce travel is already starting. Almost a sixth of global jet fuel (and most of Europe’s) transits Hormuz. Rationing is underway in parts of Asia. Thailand is inverting Jimmy Carter by asking residents to remove jackets instead of using AC.

The unelected bureaucrats in Brussels are advocating mandatory “work from home days” to “save energy”. According to the IEA, Europe has about five weeks of jet fuel remaining (the IEA is the WHO of this man-made crisis, so should be treated with suitable skepticism). Carriers have begun cancelling flights in response to fuel costs and shortages. Some have suspended financial guidance.

More ominously, starving Japan of oil is what made Tojo retaliate at Pearl Harbor. China is more powerful now than Japan was then, and has ways to manage short-term disruptions. But it can respond harshly if pushed to a corner. One option might be to withhold rare earths. Another is to embargo chips by blockading Taiwan.

We prefer not to think what others might be.

Silver Lining or False Signals?

I may be wrong about all of this, and probably am. It wouldn’t be the first time. The silver lining is that markets aren’t worried. Stock indices are at (inflation induced) records, and oil prices have subsided.

Despite the closed strait, infrastructure damage, and ongoing war, crude futures remain below $100/barrel. They haven’t eclipsed the nominal (much less real) highs after the Ukraine invasion or the all-time peak of July 2008.

Had everything that’s happened been hypothesized a few months ago, most would wager commodity futures to be twice as high. Markets are usually reliable harbingers. They may be this time too. But they occasionally send false signals with devastating results.

Despite obvious mortgage market weakness, stocks hit records less than a year before the 2008 collapse. Likewise, the S&P 500 reached all-time highs within weeks of the covid crash. The peak in 2000 was proof that that time wasn’t different.

Still… Iran has taken a beating, its “leadership” is fragmented, and the U.S. blockade has starved it for funds. For all I know, this debacle will end tomorrow. God willing, it will.

But would that wrap up a war… or end a battle? Just because the ground stops shaking doesn’t mean fires won’t start.

JD