John Mearsheimer DIRE WARNING Of Global Economic Calamity

So let's dig in deeper now to the global market and oil specific perspective.We brought the news earlier that the Houthis have announced a blockade of Saudi Arabia.John Mearsheimer was just speaking to Chris Hedges about how significant it would be if this action were taken to the global markets.He, in fact, predicted just days ago that the Iranians would be very interested in moving this direction.Let's take a listen to what he had to say.

There were about 20 million barrels per day coming out of the Gulf on February 27th.You know, when people talk about 20 % of the world's oil came out of the Gulf, that 20 % represents about 20 million barrels.And since the war started, we've devolved to a situation where 7 million barrels are still coming out of Saudi Arabia and the UAE combined.So, it's only, in my opinion, about 13 million barrels that have been bottled up in the Gulf.Now, where are those 7 million barrels coming out of?One is that Saudi Arabia is sending probably somewhere on the order of 5 million barrels out through the Red Sea, not through the Strait of Hormuz.

And I would guess that the UAE is sending out close to 2 million barrels from Fujairah, which is a UAE port on the Gulf of Oman.In other words, it's outside of the Strait of Hormuz.So you have this roughly 7 million barrels of oil 7 million out of the original 20 million that are still coming out of the Persian Gulf.I think the Iranians have a vested interest in shutting down the flow of oil through the Red Sea.That's the Saudi Arabian oil.and shutting down Fujairah.

And there's some evidence they've already shut down Fujairah.

So, Sagar, we've been talking about why there hasn't been a complete disaster in the oil market.I mean, prices are already pretty high.They're back up over $4 a gallon for American consumers today.But one of the reasons why there's been a bit of a cushion is because Saudi has been able to export some through the Red Sea.That plus China has reduced their imports significantly.We'll talk more about that in a moment.

But if that piece is going away, that could be highly significant.especially as we're sort of scraping the bottom of the barrel here in terms of our strategic petroleum reserve.

Yeah, let's just like lay out the picture.There's like two main reasons why gas is still not at catastrophic levels.Although, let's put C1 up here on the screen.I mean, as of this morning, gas is right back to $4 a gallon nationally.So it's not like, you know, people got a little bit of a reprieve around like I think the lowest we saw was like $3 .80, maybe $3 .90 per gallon.

I wonder how the Freedom Fuel Network is doing this morning.

Yeah, we should check in.We should check in on the Freedom Fuel Network.But we have $4 a gallon on here nationally.And that's where things are now when things have been cooled off.So there are two primary reasons that things did not go absolutely catastrophic.One was Saudi Arabia, as you just said, approximately 4 .5 million barrels per day that were coming out of the Bab al -Mandeb Strait that they were able to export.

That's roughly three to 4 % of the world's oil supply, which the Houthis now say they will blockade.And I do think it's worth meditating on this.Like, why should we even take it seriously?Immediately, I was looking here for the reaction.I was like, wow, this is a literal nightmare scenario.course, there's a lot of people that are like, well, that would only assume that they have the ability to do so.

And I'm like, they do have the ability to do so.They did it.They literally did this.Years ago, we bombed the living hell out of them.And we still were not able to stop the blockade.We both Biden and Trump expended a serious amount of munitions.

And you know how the Houthis responded?They were able to do soand they even clipped an F -35.Let's not forget about that.So these are not just some guys, you know, with RPGs in a cave.Like, this is some seriously capable guerrilla force.

It also doesn't take that much because you're relying on commercial shippers.I mean, you've had sailors on these cargo ships who have been killed.

Yeah, many.

And then you have the insurance companies that are also saying, no, we're not going to insure your cargo ship.going through this active war zone where a blockade has been imposed.So you kind of have, you know, capitalism working against you here as well.They're just not going to be willing to take the risk.And who could blame them?I mean, if you're a sailor, one of these like working class men from around the world who are staffing these ships, you want to risk your life to run the blockade?

I don't think so.Not at all.And you've had captains who have actively been, their companies that, hey, you're going to take this route.And they've said, no, I'm not doing that.

So you will see some of that as well.war.Nobody really knows why.The general theory is that when oil was cheap, they stocked up.They have a massive strategic petroleum reserve.But one of the things that we kept hammering home here is eventually they will have to buy some oil.

They may not resume the full 12 million barrel per day purchase that they were at, but a resumption in their price because of their sheer size for a massive oil importing nation means it will put significant, significant pressure on the global oil market.Oil is a global commodity.at least for now before things get totally Catastrophic and you have to start doing crazy stuff.Well with the Chinese imports, let's put c3 back there on the screen It is the single most determinative factor whenever it comes to the global oil market and so if you have two primary shocks that are already coming into a shocked system.And what I mean by that is the five -month closure of the Strait of Hormuz, or at least disruption of the Strait of Hormuz.Then you have the Red Sea, and then you have China.

That is primarily why oil is not at $200 per barrel.But if it resumes buying, If China buys oil again with gusto, and this is when prices were in the $60 range, he predicted, this is Javier Blas, who's the chief energy commodities analyst over at Bloomberg, he said it would push the price to $80 a barrel.So $20 a barrel rise, just a resumption of oil.So just to give a picture, we are currently around 90.as of this morning.Things are fluctuating, obviously, because of the Houthis announcement, because of the resumption of war, or at least seeming like there's no memorandum of understanding, and of course, a reduction in what's happening.

$90 is where put things gas right around $4.But if you go to $110, $120, $130, $140, $150, things can get catastrophic very quickly.And then finally, really, why we should pay attention is and i said guys i sent this this morning i'm not sure which element it is is that what we have currently is an incredibly low stockpile which i know we've talked about from the strategic petroleum reserve but secondary to that is not just the petroleum reserve it's crude oil inventories of what's left in the united states the slack in the system so if you take a look at this picture you can actually see crude oil only has about 43 days of supply left in the united states that is the lowestin the 45 years of history of taking all of the of taking inventories.That lack of slack is exactly why Trump buckled in the first place.Remember, he said, I don't want to be Herbert Hoover.

That was higher than where we are today.So 43 days left of supply.Again, I'm not an oil commodities guy.I've tried to learn as much as I can over the last several months.The reason I understand it is that obviously there's a fluctuation in how you produce oil.It's not exactly like a one -to -one business.

So you need that slack to have like confidence in the market that it'll be there when you order what you have when all that gets taken away and if it runs to zero that's when stuff gets absolutely bonkers that means just like you know for delivery time but you know just in time delivery except it would be just basically no confidence in the market that's when export bans and all those other things might come into play literal shortages people just running out of stuff and maybe this is all you know hyperbolic i can understand why someone would say that uh after the five months of us talking about it but i mean at a certain point It's like this is the reason strategic petroleum reserve existed in the first place and to now be at the lowest level since 1983 you would just have no runway and so I mean we'll see That's really the only thing because you can't look at the current situation and say oh, yeah, Trump is going to blame He definitely could at any moment like he did last time I still think he probably has to just because of the logic of where we are but You got four Americans now who were killed just in the last 48 hours, 72 hours, something like that.You have low inventory.I mean, what if they do a ground invasion?It's possible.And if they do that, it's over.There is no coming back from a ground invasion of any kind.

You can't just withdraw them, and then we take more casualties.So if we don't tackle at least some point in the next two, three weeks, that's where we're going.

Well, and here's the other thing.we haven't even mentioned, which is Ukraine is hitting Russian oil infrastructure as hard as they possibly can to try to, you know, create pain for the Russians.But inherently, that's going to create more pain for the global economy because these markets are all completely intertwined.So, again, Javier Blas says chart of the day.Morgan Stanley reckons more than half of Russian oil refinery capacity is down due to Ukrainian attacks.Typically, Russia is the world's second largest diesel border, normally around 11 percent of global seaboard trade.

And so just when we say it's a global commodity, what we mean is even if you have a country that is not directly buying oil from Russia, the fact that Russia is producing and exporting oil is creating less pressure in the market and keeping prices more in check because it's being bought by somebody.So when you have also these Ukrainian attacks paired together with it looks like China's increasing their buying paired together with now we've got a full blockade in the Strait of Hormuz.Now we've got Yemen saying, hey, we're gonna blockade Saudi Arabia in the Red Sea.This is all looking very grim.Now, I don't think there's anyone in the world who could say this is the moment when the shit hits the fan, right?But I keep coming back to what Trump said when he did taco, when he said we've got a few weeks left.

He has access to, presumably, the best information in the world.So if you're thinking to yourself that there's some other rabbit that he's going to be able to pull out of a hat to lessen the pressure in the oil market and forestall what we know eventually at some point is going to happen.That would be an indication to you that he does not have another rabbit in the hat that he can pull out, that all of the things that could be done to keep prices as low as possible, which ain't that low to begin with, but as low as possible without things going to $200 a barrel, that has all already been done.All of those levers have already beenbeen pulled.So, you know, we know certainly that the clock is ticking.

And when you go back to the Iranian strategy, this is what, when they decided to move forward with negotiations and sign the MOU, this was the logic that they put forward, Sagar, that they thought, even if, you know, we have some pressure release now, As long as the clock is ticking, we are getting closer to the time and pressure is building to the time when there will be massive global economic fallout.And I think if we look at that, if we look at the fact that they were able to, you know, they were able to sell a bunch of oil, refresh their coffers in terms of their finances.They were able to dig out a bunch of their missile cities and be able to prepare for the next escalatory attack.We were not able to do the same.You know, we didn't spin up manufacturing.We didn't refurb the bases that had been destroyed throughout the region.

They come into this new phase of the conflict.Actually, relative to the U .S., much stronger than they started the war between all of those pieces.So, you know, that's the landscape that's facing all of us right now.

And I'm just looking even at the more recent strike information.So Kuwait is getting hammered in the last like three days.So they've had huge oil hits, water desalination and energy.There's pictures of backup generators that are all being driven around in trucks.Like when you start to see the government bring out the backup generator, not where I want to be, on the back of an 18 wheeler truck, Well, this country exported zero oil for 30 days.That's 3 % of the total supply of the world.

5 .6 % of the entire global oil reserve, much of which the production had to be taken offline because they literally couldn't export anything.And now they're getting completely hammered and struck in terms of their infrastructure, where even if the war ended now, they have to rebuild it, they have to do all this stuff to get it out there.That's just Kuwait.And then we talked about Saudi Arabia.That's another 40 days.of the world's oil.

Will it be blockaded?We'll see, right?Obviously we'll cover it here for a couple of days.The Strait of Hormuz is basically closed.Yesterday, literally just yesterday, another tanker is on, or sorry, overnight, so while we were all sleeping, a tanker, a Greek ship got hit.Apparently there's like one Greek company which continues to trying to run the blockade.

Everybody else is like, yeah, we're good.Right.And so you have a trickle of a number of ships that are coming through.You've got ships that are being struck at oil infrastructure, water desalination.And then Iran has a nuclear power plant hit.I mean, how can you not look at all this and say we are on the precipice right to the Trump and Hoover point whenever he was talking about the slack?

I mean, This is one at least benefit to the world.Oil inventory and petroleum reserve and all that is heavily documented.You can go, as we have preparing for the show, just go to the International Energy Agency's website.they will show you what the Strategic Petroleum Reserve of all the participating nations is, how much they've released, and how much is left.We have a few weeks left for what that initial Strategic Petroleum Reserve release is.There's basically no more oil left in it for the critical operating levels.

So there's nothing left between crude oil inventory and the Strategic Petroleum Reserve.We know exactly where it will all come from.You can dial things up maybe in the US, but a part of the problem too for Saudi Arabia, the closure, and for now the stoppage straight of Hormuz oil is that means that this inventory will go faster because the Trump administration brags a lot about how we export all this oil.We have been exporting a absolute shit pot of oil, but that has got to, that is going to be made up for in terms of orders from Japan, from Korea, from all of these other nations around the world, all competing for all our oil.And then you add Russia, on top of that for all this diesel and the natural gas in terms of Qatar and their inability to get so like all of theground is set for a genuine, I mean, we're already living in crisis, but even more of a crisis, in my opinion.

And I think especially, this is just, and I try to emphasize this in our shows, but it is genuinely important.A black swan event like a hurricane will break us, or not just us, somewhere around the world.Who knows, some nation, tsunami, tornado, whatever they call it, cyclone or something, it's over.Because if you take something like that off, then the slack for Japan, for Korea, for any of these other countries, that's when you're broken.You have nothing left to ship you.right?

All of the naval assets are in the Gulf.We didn't even bring this up in the A Block in terms of a potential crisis.A bunch of warplanes from Germany and from the rest of the world, they're going to the Middle East, which means if some stuff kicks off in Ukraine and Russia, we got nothing there.It's gone.Same with all the carrier strike groups and all the munitions have all been basically stripped from PACOM or from from Korea, from all of these Air Force bases, there is nothing that is currently there that is not nailed to the ground.And so that just means like, you know, everyone thinks things will kick off with just because of Iran, it definitely might, you know, as what we're saying, but I actually think there will be some Katrina style event, not maybe either here in the United States or somewhere else in the world, or potentially some sort of, you know, Taiwan situation, nobody knows, North Korea, it could be anything.

And that is what actually will break the entire system, because that's when, when you have nothing left, that's when the whole world will change.

We are redlining the global economy right now.We are pushing it to its absolute limits.We are taking out any sort of slack or buffer so that if, you know, if, I mean, if we just continue in this direction, it's unsustainable.But if we have some sort of a catastrophic weather event or other event that is unforeseenalthough the weather events are kind of foreseen because we are in this massive El Nino cycle.But in any case, something that is unforeseen, then we will be in a world of trouble.

Last one I'll put up on the screen, C6, Brent crude crossing, $90 a barrel.It has now gone down to like, it's at like 89 this morning, 88.And this is the thing that I'm like, It makes no sense to me, right?I mean, I'm looking at all of these numbers.They're living apparently off of the hopium of this like, oh, there's some 10 -day negotiation that's going on.And so the stock market is up and the oil prices have ticked back down a little bit.

I don't know.I hope their hopium is justified, but they seem to ignore every other indicator.If there's even one thing that's slightly positive, they'll be like, I think this is going to work out.And I guess they're in part betting on, you know, that all the other traders and all of the other players will also seize on that hopium.and act accordingly, but at some point with oil, there is a reality here of what exists and what doesn't exist and what is getting into the global economy and what is not.So there has to be a reckoning at some point.

It's not like SpaceX where you can just have the theory of the possibility indefinitely, although SpaceX is not doing all that well either.

Right, and even if we do get out of this, we're just all gonna be paying 350 a gallon for forever.I mean, at this point, for the rest of Trump's presidency.So it's not going down significantly anytime soon.Actually, we even saw, with the memorandum of understanding, how low did it get, 380, right?I mean, that's a preview of what it's gonna be like for a long, long time.All right, let's get to insider trading.

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