I got to thinking about how the math might work if some recent developments all come together as planned related to the shutdown of tanker traffic through the Strait of Hormuz, and put it in an X post a little bit ago:
The emphasis should be on building more refineries to meet the materialist demands of humanity for the products and transportation fuels MADE FROM crude oil.
Crude oil by itself is useless black tar, unless you build a multi-billion-dollar refinery to break it down to produce various types of transportation fuels, and oil derivatives that are the basis of the products in our materialistic world.
“Iran is now allowing oil to flow to China, and is negotiating a deal with India, meaning that soon, 10.5 mmbpd could be back on the market.”
How so when the Strait of Hormuz is currently closed ?? Iran is preventing any oil tankers to pass thru S of H.
Please explain how 10.5 mmbpd of Iranian oil “could soon be back on the market” when it cannot be transported while the Strait is closed to ALL traffic.
I think we are getting inaccurate info about what is and is not going through the Strait. Tricks are being played with the transponders which is messing with the Satellite tracking data.
Well O.K….. But 10.5 is essentially 50% of 20.7. That’s a huge discrepancy or error to be attributed to “tricks on tracking transponders.” Virtually all news outlets, both MSM and independent sources, indicate that as of today Friday 3/13/26 absolutely no oil (or LNG for that matter) is being transported thru the Strait. Come hell or high water, the blockage will eventually end. Hopefully very soon, but just as likely several weeks from now.
Iran said if they don't give permission to a tanker, its going to be hit. So if its their oil going to their customer, they won't bomb it. Not sure how that works with mines though.
As usual David, thank you for providing a rare beam of rational analysis in a world going mad. The irony is that by carving out these exemptions for China and India, Iran takes pressure off the crude price and therefore undermines its strategy of economic attrition via sharply higher inflation. A total blockade of the Straits of Hormuz has hitherto been the major pressure point Tehran has had, but carving out these exemptions is the equivalent of letting steam emerge from the pressure cooker. Oil is a fungible commodity after all.
Longer term, as you note, this won't be an issue as many other pipelines will be constructed to evade this eventuality in the future.
One also hopes that this will discourage President Trump from constantly disparaging his neighbour to the north, as Canada has proved a pretty reliable supplier in the past! Just saying!
Agree with your irony comment. I think for Iran, it's a mixed bag. They need the revenue to sustain the war effort, so they're trying to pick and choose among customers. That is not sustainable in the long run although it is having this short-term impact.
I didn't google the terrain to see if its even feasible, but a thought occurred to me of a canal through UAE, to get tankers away from tobacco spitting distance of the Strait.
Probably an expensive long-shot to do a canal vs a pipeline. But it would keep tanker traffic away from the nasties.
I had that thought, too, but then realized it's probably tougher to take out a pipeline than it is to take out ships in a canal, even though it would be a longer shot.
not to mention taking the sanctions off Russia - but tell me why we are allowing oil to flow to China - seems like a good negotiating point - on oil to Europe no oil to China
The market price is responding to hype and not to physical movement of oil. But that's what the traders are taking advantage of today - the inability of rational analysis of any situation. Of course the strait is a focal point and the tricks with transponders are well known and have been in play for some time. Keep tuned to what is happening in China and you'll know how much curtailment is caused by the strait. But the strait condition is fodder for the drama queens in hte media.
from my ongoing analysis with claude opus 4.6 extended:
This article's math is optimistic to the point of being misleading. Let me address the problems, then search for your specific questions.
The pipeline math doesn't work as presented. The East-West pipeline's 7M b/d capacity is gross, not net additive. As we just established, 2M b/d was already flowing, Aramco needs 2M b/d for its own Red Sea refineries, and Yanbu port can only load ~4-4.5M b/d. So the actual additive export capacity is 3-4M b/d, not 7M.
Iran "allowing oil to flow to China" is the toll booth Garcia identified — Iran shipping its own oil while blocking everyone else. The 7.6M b/d that flowed to China through Hormuz wasn't all Iranian oil. It included Saudi, Kuwaiti, Iraqi, and UAE crude destined for Chinese buyers. Iran letting Chinese-bound cargoes through doesn't restore those other countries' exports — their production is shut in or rerouted through the pipeline.
The SPR release of 2-3M b/d is a stock draw, not a flow. Garcia made this point quoting Tracy: "A stock is not a flow." You can release reserves for weeks, maybe months, but it depletes. At 2-3M b/d, the roughly 1 billion barrels of IEA strategic reserves last 51 days per Garcia's math. Then what?
The article completely ignores natural gas and LNG. No mention of Qatar's 77 mtpa stranded. No mention of the fertilizer chain. No mention of the sulfur cascade. It treats the crisis as a crude oil math problem when the LNG disruption may be more severe and longer-lasting.
The emphasis should be on building more refineries to meet the materialist demands of humanity for the products and transportation fuels MADE FROM crude oil.
Crude oil by itself is useless black tar, unless you build a multi-billion-dollar refinery to break it down to produce various types of transportation fuels, and oil derivatives that are the basis of the products in our materialistic world.
“Iran is now allowing oil to flow to China, and is negotiating a deal with India, meaning that soon, 10.5 mmbpd could be back on the market.”
How so when the Strait of Hormuz is currently closed ?? Iran is preventing any oil tankers to pass thru S of H.
Please explain how 10.5 mmbpd of Iranian oil “could soon be back on the market” when it cannot be transported while the Strait is closed to ALL traffic.
I think we are getting inaccurate info about what is and is not going through the Strait. Tricks are being played with the transponders which is messing with the Satellite tracking data.
Well O.K….. But 10.5 is essentially 50% of 20.7. That’s a huge discrepancy or error to be attributed to “tricks on tracking transponders.” Virtually all news outlets, both MSM and independent sources, indicate that as of today Friday 3/13/26 absolutely no oil (or LNG for that matter) is being transported thru the Strait. Come hell or high water, the blockage will eventually end. Hopefully very soon, but just as likely several weeks from now.
Iran said if they don't give permission to a tanker, its going to be hit. So if its their oil going to their customer, they won't bomb it. Not sure how that works with mines though.
“Iran said……”. For now, that’s just cheap meaningless talk. Currently no oil is moving anywhere thru the Strait.
True
As usual David, thank you for providing a rare beam of rational analysis in a world going mad. The irony is that by carving out these exemptions for China and India, Iran takes pressure off the crude price and therefore undermines its strategy of economic attrition via sharply higher inflation. A total blockade of the Straits of Hormuz has hitherto been the major pressure point Tehran has had, but carving out these exemptions is the equivalent of letting steam emerge from the pressure cooker. Oil is a fungible commodity after all.
Longer term, as you note, this won't be an issue as many other pipelines will be constructed to evade this eventuality in the future.
One also hopes that this will discourage President Trump from constantly disparaging his neighbour to the north, as Canada has proved a pretty reliable supplier in the past! Just saying!
Agree with your irony comment. I think for Iran, it's a mixed bag. They need the revenue to sustain the war effort, so they're trying to pick and choose among customers. That is not sustainable in the long run although it is having this short-term impact.
Good thoughts, David.
I didn't google the terrain to see if its even feasible, but a thought occurred to me of a canal through UAE, to get tankers away from tobacco spitting distance of the Strait.
Probably an expensive long-shot to do a canal vs a pipeline. But it would keep tanker traffic away from the nasties.
I had that thought, too, but then realized it's probably tougher to take out a pipeline than it is to take out ships in a canal, even though it would be a longer shot.
Yes, I can see that happening.
Like shooting ducks in a kiddy pool.
not to mention taking the sanctions off Russia - but tell me why we are allowing oil to flow to China - seems like a good negotiating point - on oil to Europe no oil to China
The market price is responding to hype and not to physical movement of oil. But that's what the traders are taking advantage of today - the inability of rational analysis of any situation. Of course the strait is a focal point and the tricks with transponders are well known and have been in play for some time. Keep tuned to what is happening in China and you'll know how much curtailment is caused by the strait. But the strait condition is fodder for the drama queens in hte media.
Awesome analysis and post!! Thanks David!!
from my ongoing analysis with claude opus 4.6 extended:
This article's math is optimistic to the point of being misleading. Let me address the problems, then search for your specific questions.
The pipeline math doesn't work as presented. The East-West pipeline's 7M b/d capacity is gross, not net additive. As we just established, 2M b/d was already flowing, Aramco needs 2M b/d for its own Red Sea refineries, and Yanbu port can only load ~4-4.5M b/d. So the actual additive export capacity is 3-4M b/d, not 7M.
Iran "allowing oil to flow to China" is the toll booth Garcia identified — Iran shipping its own oil while blocking everyone else. The 7.6M b/d that flowed to China through Hormuz wasn't all Iranian oil. It included Saudi, Kuwaiti, Iraqi, and UAE crude destined for Chinese buyers. Iran letting Chinese-bound cargoes through doesn't restore those other countries' exports — their production is shut in or rerouted through the pipeline.
The SPR release of 2-3M b/d is a stock draw, not a flow. Garcia made this point quoting Tracy: "A stock is not a flow." You can release reserves for weeks, maybe months, but it depletes. At 2-3M b/d, the roughly 1 billion barrels of IEA strategic reserves last 51 days per Garcia's math. Then what?
The article completely ignores natural gas and LNG. No mention of Qatar's 77 mtpa stranded. No mention of the fertilizer chain. No mention of the sulfur cascade. It treats the crisis as a crude oil math problem when the LNG disruption may be more severe and longer-lasting.
LOL. Gosh, you'll have to pardon me for not trying to cover the entire globe in a single post, you big Claude user, you.
Now, go away.