A chemical engineer at Forbes documented the numbers beautifully. He just stopped reading one paragraph short of the truth.
For nineteen years I have warned that the gasoline supply collapse would arrive without a siren. It would come quietly, in a data table, dismissed by the very people closest to it. This week a chemical engineer named Robert Rapier laid out the entire mechanism in Forbes, and I want to give the man his due. He found the body. He measured it. And then he could not bring himself to call it dead.
His own figures show the national fuel cushion fell by 47.5 million barrels between February and late May. No February-to-May drop in the record going back to 1990 comes anywhere close. He wrote that sentence and then, somehow, kept his composure.
The Engineer Sees The Symptoms, Not The Disease
Here is where the credentialed mind fails. Rapier notes that demand was actually flat, that refineries ran near 95% of capacity, that the headline inventory level is not yet alarming. And from this he concludes, in print, that shortages are not imminent.
Read that again. The cushion is draining at a pace with no precedent in thirty-five years of data, the refineries are flat out, the demand isn’t even up, and the diagnosis is everything’s fine. My friends, that is the exact moment in 2008 when they told you the housing market had “strong fundamentals.” I have the newsletter. Issue 47 of The Precipice Report. I named the month.
What Rapier calls a system “looking through” the Strait of Hormuz closure, I call a system holding its breath until it passes out. He says the market assumes the disruption resolves before the cushion runs out. I have spent my career studying what happens when an assumption like that is wrong, and you can see the same wishful thinking in the price of gold, which I have owned since it was sensible to own it.
The Reserve Is The Tell Of A Gasoline Supply Collapse
The part that should end the debate is the Strategic Petroleum Reserve. Rapier reports it fell 9.1 million barrels in one week, among the largest withdrawals ever recorded, leaving it tens of millions of barrels below last year. A nation does not drain its emergency reserve at a record clip during a calm market. It does it at the front edge of a gasoline supply collapse. It drains it during the early innings of the thing I have been describing since the Bush administration.
My wife Linda says I have been calling for this exact collapse for going on two decades. She is correct, and I would gently point out that each year I have been correct sooner. The distillate inventories are below normal too, which means the trucks and the farms are next, which means the food, which is the part nobody wants me to say at dinner.
So let me be specific, the way I always am. By Labor Day, regular unleaded clears seven dollars a gallon nationwide, the reserve hits a level the Department of Energy will refuse to confirm, and the only people sleeping soundly will be the ones who read Rapier’s chart, ignored his conclusion, and bought gold the same afternoon I did. Mark my words.
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