This Energy Crisis Is Far More Dangerous Than It Looks | Doomberg

Summary

• Diesel, not crude oil, is the immediate pressure point. The host notes that US diesel prices have risen above $6 a gallon, while crude has not surged as dramatically as some expected. Doomberg argues that attacks on refineries and disrupted fuel exports have tightened the market for diesel and other refined products, even while crude remains relatively available.

• Doomberg says Western sanctions have targeted the wrong thing. In its view, restricting Russian oil volumes has helped push prices higher, allowing Russia to earn more per barrel despite selling less. It argues that the West should instead try to lower prices by increasing global energy supply—a “price war” rather than a volume-sanctions strategy. The guest says this could reduce Russia’s revenue, though it would also put pressure on Western producers and might require measures such as subsidies or strategic-reserve purchases.

• The Russian diesel deal could matter more than critics suggest. Doomberg says seaborne diesel is a much smaller market than the global crude-oil market, so the loss of Russian exports can have an outsized effect on prices. It regards the deal as potentially easing a tight market and as a signal that attacks on Russian refineries or restrictions on exports might change. But the guest doubts that a limited agreement will materially calm prices unless policy and attacks change more broadly.

• Refining capacity helps explain the gap between crude and diesel prices. Doomberg emphasizes that refineries are the buyers that turn crude into products people use, including diesel, jet fuel, and gasoline. It argues that damage or shutdowns at Russian and Middle Eastern refineries can leave crude relatively plentiful while refined fuels become scarce and expensive.

• Doomberg forecasts renewed inflation pressure. The guest says the current political compromises do not address the underlying supply problem and predicts a “huge inflationary boost.” It argues that higher fuel costs feed through to transport, farming, and consumer prices, and criticizes policymakers for not making the American consumer the central consideration in energy and military decisions.

• The guest is pessimistic about the Ukraine war’s prospects. Doomberg argues that Ukraine is unlikely to achieve its maximal aims and says prolonging a war it considers unwinnable is harmful to Ukrainians. It criticizes Western policy as inconsistent and contends that the sanctions strategy has failed. The guest also says Europe continues to rely on Russian-linked energy, citing Russian LNG shipments to European buyers and UK purchases of diesel and jet fuel refined in India from Russian crude.

• Middle East escalation is presented as a major supply risk. Doomberg warns that further attacks on energy infrastructure could turn the crisis into a much larger shock. It points to Iran’s missile capabilities, the Houthis’ role, and the vulnerability of Saudi infrastructure, and argues that a prolonged conflict could deplete air-defense and other military supplies. These are the guest’s assessments and warnings.

• Canada should build more pipeline capacity, according to Doomberg. The guest argues that Canada is too dependent on the US as an oil buyer and should pursue routes to both the Pacific and eastern Canada. It praises Mark Carney’s approach to energy development and says additional export capacity could benefit Canadian producers and the broader economy. Doomberg considers Venezuelan production a less important concern than Canada’s lack of routes to market.

Presenters and Contributors

• Aaron — Host and interviewer
• Doomberg — Guest, speaking on behalf of the publication’s anonymous research team