George Gammon Diesel Shortage Code Red
Is It Time To Panic? Prepare!!!
Another excellent presentation by one of the best financial experts in the business. It looks like we’re headed to Road Warrior movie replay. George makes it entertaining also.
George, Your charisma, interactive performance, ability to explain serious things in a funny way makes me believe that we’ll survive in any hard times 
Even diesel is transported by diesel
Yup, these whiteboard videos are definitely awesome. Thanks George. Your the man. Get your money out of the banks and into hard assets ASAP guys
This was a very well needed video for the YouTube archives you don’t get this kind of information often
Your takeson macro economics are so good George . Love listening to you and craving my brain with knowledge.
. Love listening to you and craving my brain with knowledge.
I find it interesting that we’re not hearing warnings of an impending Jet (A) fuel shortage.. After all, their specific densities are not that far apart in the refining stack.
George Gammon Diesel Shortage Code Red
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the United States diesel shortage going
into the code red stage is it time to
panic I’m going to explain this to you
in three simple fast steps into the end
of this video you’ll be able to draw
your own conclusion as to whether you
should just sit back and pretend that
nothing’s wrong or you should start to
prepare immediately step number one
let’s go over what the actual problem is
first and foremost you have to
understand
diesel fuel is used in every single
thing you buy you can sit there and say
to yourself oh George you’re just
fear-mongering oh this is Click bait
nonsense really
just try to think through a world where
we didn’t have any diesel
there would be nothing
literally nothing transported we
wouldn’t have heating oil in many of the
parts of the country and if the problem
doesn’t seem dire enough you wouldn’t
have any food none nothing unless you
grow your own in the backyard so when I
sit there and say that if the United
States runs out of diesel it will be
like a Mad Max movie we’re talking about
a complete hellscape like a zombie
apocalypse and if you don’t believe me
editor let’s cut right to a clip from
NPR
what exactly is Diesel and why is it so
important as an energy source
diesel is the fuel of the economy and
it’s in just about everything that we
use the bulk of manufactured and Retail
Goods move day and night on trucks and
trains powered by the fuel and
Manufacturing farming and heating also
relies on diesel and Diesel is so deeply
embedded in American life that its
consumption is often seen as a barometer
of the country’s overall economic
activity without it the supply Chains
would collapse and things simply
wouldn’t work
so let’s go to a chart of diesel
inventories and see just how bad the
problem is and throughout the rest of
the video we’ll try to analyze what the
cause is and what the end game will be
how will this play out so this is a
chart like I said of diesel inventories
going back to 2020 all the way to
October of 2022. on the left we go from
20 days
of inventory up to 55 days
so as you would imagine during the
cervasive sickness the inventory spiked
higher because demand went down so much
but since this time we’ve really seen
the inventories Trend straight down now
you get some big blips here and we’ll
get into that in Step number two that’s
really because some of the refiners shut
down in the fall and in the spring for
maintenance but the main takeaway is
it’s declined rapidly to the point where
we are today where we only have 25 days
of inventory left the worst place we
have been since 2008 and you may be
saying to yourself yeah George it’s no
big deal I mean hey we’re able to
recover in 2008
yeah with a global financial crisis and
this time it may be worse because the
system itself and the reasons for the
decline in the inventories are much much
different than they were in 2008. I’m
going to reveal what these huge
differences are throughout the rest of
this video
step number two so what’s the cause of
the problem how did the United States
get to the brink of this crisis
situation well as you would imagine it
starts with the central planners the
politicians and the government making
bad decisions let’s go back to 2020 and
a lot of the refiners went bust these
are the refiners that take the oil and
turn it into the diesel we need to run
the economy and the central planners
would lead you to believe believe that
the reason they went bust was because of
the cervasive sickness absolutely not it
was the policies implemented by the
authoritarians themselves that led to
all of the economic destruction we saw
it wasn’t because of the cervasive
sickness it was because of the
government policies so the demand
plummets and therefore a lot of these
refiners go bust you remember when oil
went to negative 38 dollars a barrel I
believe that was April of 2020. this
means that the refiners aren’t making
any money
imagine that when oil is actually
negative and there’s almost zero demand
for gas or any of the products they
produce
so the next thing that we have to look
at is they haven’t had any reinvestment
because now these refiners the ones that
are left are absolutely printing money
their margins have exploded higher as
you can imagine with demand going back
to where it was but yet all of their
competitors are pretty much out of
business so then the question becomes
okay well why aren’t they taking all
that profit in building into additional
capacity why aren’t they building more
refineries for the ones that we lost
back in 2020 well first of all takes a
long time to build a Refinery it’s not
something that you just throw up in six
months like you would a single family
home secondly if you owned a Refinery
would you reinvest in more capacity when
you have the government breathing down
your neck saying that we’ve got to do
something about climate change or in
California they’re saying we’re not
going to sell any gas cars in the future
only electric car cars by 2035 and
you’ve got the great reset agenda you’ve
got the green New Deal you’ve got Greta
third Thorne dunberg or whatever her
name is how dare you making the claim
that we’ve got to rid ourselves of all
fossil fuels they’re the devil and
they’ll lead to our ultimate demise how
dare you but isn’t it ironic that the
process of weaning ourselves off of
fossil fuels or the attempt to do so too
early is actually what is causing the
demise of the United States and the West
as we know it how dare you everybody
wants clean energy renewable energy and
clean air but the problem is if we go
from A to B too quickly and if we do it
with a top-down approach instead of a
bottom up approach there isn’t going to
be an economy or a society to benefit
from the Clean Air derived from those
renewable energy sources in other words
all those windmills aren’t going to do
you any good if you’re living in a cave
and you have to forage for your food in
a world that looks like the Mad Max
movie the third cause of our problem is
the sanctions on Russia listen I’m no
fan of what Putin did but the bottom
line is you can’t enact a policy that’s
going to hurt us more than it hurts
Russia it’s like going into a fight and
punching yourself in the face so many
people say you we’ve got to do something
we’ve got to do something right maybe we
do but doing something doesn’t mean that
we have to do something that’s going to
hurt us and not hurt them this makes
absolutely no sense but again it goes
right back to the unintended or maybe
intended consequences from the central
planners policies just like we saw
during the lockdowns of 2020. to
illustrate these points further let’s go
right to the internet and check out a
clip from Bloomberg
it is a huge problem
um and uh in fact if you look across the
commodity Spectrum we’ve been arguing
there’s Commodities that are in a good
situation some are in a bad situation
and some they’re in an ugly situation
and Diesel definitely qualifies as an
ugly situation commodity because of
three main reasons uh reason number one
is that we’ve had a huge disinvestment
in refining capacity because we had weak
demand throughout the last couple of
years during the pandemic and uh and
then of course we were all moving
quickly to an electric vehicle future
that’s maybe taking a little longer than
we expected as we’ve learned with with
Tesla but
um so I think I think we’ve lost about
two million barrels a day two percent
capacity on on refining that we were you
know there’s now uh coming back to
haunters Second factor is the very very
high natural gas prices globally
remember high gas prices hurt refining
refining margins because gas is a key
input into the refining process this is
what we use to burn crude oil to create
diesel as essentially that’s gas uh so
that’s not help as either and then the
third Factor uh really on the on the
supply side which has been a big problem
is sanctions on Russia
now let’s go to the Whiteboard so we can
go over a visual of exactly what they
are talking about on the Bloomberg clip
this makes it very clear what is causing
the problem we’re facing right now so
we’ve got the United States right here
and this is let’s say in 2019 prior to
the cervasive sickness and let’s just
say that we had three oil refineries now
we had a lot more than that but just for
this example so this is an oil refinery
obviously
and they’re producing a barrel of the
diesel we need
and let’s assume that the United States
in aggregate total has demand for six of
these barrels of diesel okay well the
United States is producing three but we
have to import diesel as well where
from Russia
so we produce three barrels and then we
import three barrels that gives us the
six we need no problem but fast forward
to today after all these bad policies we
now only have one Refinery because two
of them have gone bust and we have no
reinvestment in extra capacity because
you’re drunk insolvent Uncle Sam is
talking about a world that he’s going to
force us into whether we like it or not
we’re a hundred percent of the vehicles
are electric we’re using no fossil fuels
and we have a windfall profit tax again
if you’re a refiner and you’re making a
little bit of money after you basically
almost went bust in 2020 because of the
government in the first place and now
they’re talking about taxing you even
more are you going to take your profits
and invest in additional capacity
absolutely not but then let’s also
remember that we’ve come completely
sanctioned Russia so all of the diesel
we were importing from them now we’re
getting zero
so let’s remember we still have six
barrels of demand
but now we’re only producing one barrel
and we’re getting zero barrels from
Russia
therefore what would you expect
inventories to do
decline further and further and further
to the point where we’re in a code red
crisis
and these are the differences that make
today’s situation far dire than what we
saw in 2008 the last time that we only
had 25 days of inventory left for the
diesel that is so crucial to our economy
and our society
step number three what is the end game
how will this play out and maybe more
importantly is it time to panic these
are actually pretty easy questions to
answer the first option we have here to
bring this Supply demand down back down
to an equilibrium to where we can manage
it and bring our inventories back up is
to have a GFC 2.0 what I mean by that is
to have an economic collapse or an
economic crisis you say George well
that’s not a very good solution and I
would agree that’s a very very bad
solution but even the mainstream media
is talking about this how we won’t get
our inventories back up to a level above
crisis or above emergency levels without
having a substantial decrease in demand
what that means in normal persons speak
is we have to have an economic recession
and economic depression so demand goes
right back down to where it was during
the cerveza sickness when everyone was
in lockdown and then we can gradually
build up those inventories with the
reduced amount of refining capacity
we’re now faced with in 2022 and this
might be the most probable outcome look
at the yield curve right now not only is
the two year inverted with a 10-year but
now the three-month treasury is yielding
a higher rate than the 10-year treasury
a very ominous sign for not only the U.S
economy but the global economy but we
got to keep in mind that if we go into
an economic recession what this means is
a lower standard of living more on that
in just a moment
so we could see this we’ll call it
economic crisis GFC 2.0 however you want
to label it where demand goes from those
six barrels we talked about in Step
number two down to three barrels okay
well how does that impact Europe this is
a very important question let’s say for
right now they have a demand of Five
Barrels but they only have a supply of
four so their prices are still going up
they’re still in a very bad spot and
this would continue in my opinion even
if we had an economic slowdown
but if we don’t get that slow down then
the inventories will continue to
decrease until they get to the danger
zone that’s going to mean prices go
higher and higher and higher let’s
remember that diesel is settled in
dollars so this gives the United States
a massive Advantage we can actually
print the dollars we need to buy the
diesel in case of an emergency situation
but remember there’s very limited
capacity not just in the United States
but globally
so if the price goes higher and higher
and higher yes the United States can
import more diesel but that takes diesel
away
from other countries other nations like
Europe so then they go into a scenario
where their demand is still five but
since we’re sucking up all the diesel
Supply away from them coming in from the
UAE or wherever it’s coming in from then
their supply actually goes to one and
let’s remember that energy is the
economy so if you have less energy
the inevitable outcome will be an
economic decline in a lowering of the
standard of living but it’s not just bad
news for Europe because of the much
higher prices than we would see demand
go down in the United States maybe not
that much because demand for diesel is
very inelastic but remember any lowering
of diesel usage meaning a decrease in
demand will inevitably lower economic
output so yes the higher prices would
definitely affect Europe along with many
other countries who have to import that
diesel but don’t have the ability to
print the dollars needed to buy that
diesel at any price but let’s remember
even in this scenario the United States
doesn’t get out of this unscathed so
this equilibrium the problem between
supply and demand that we have with
diesel right now yes it can get better
if we have an economic crisis you want
to look at it that way but what’s
interesting is if we don’t have an
economic crisis that brings down demand
the price will go up and up and up which
will create an economic crisis in and of
itself
so regardless of how this plays out
unfortunately the net result is still
the same and that is an economic decline
to put it mildly as a result of this
diesel shortage code red so then the
question becomes is it time to panic
I don’t know if I go that far but it’s
definitely time to prepare
and if getting in a panic is what you
need to motivate you to get out there
and stock up on diesel if you have a
generator or buy six months of food then
maybe yes I would encourage you to panic
whatever you need to do to get prepared
for what could be coming down the road
over the next six months this is a very
serious situation and one that should
not be ignored so what would the proper
actions be without having to go through
a GFC 2.0
very very easy first and foremost get
rid of these insane sanctions against
Russia they’re only hurting us and
they’re not really hurting them so why
do them I get it from a political
standpoint you have to say that you’re
doing something but if the only thing
that you’re doing is destroying the
economy of Europe and the United States
it doesn’t make any sense the next thing
you do is get rid of this crazy
narrative that demonizes fossil fuels
and there’s refiners actually making
profit yes it would be great we need to
think about transitioning to renewable
energy but we need to do it in a smart
prudent way not one that is completely
reactionary haphazard and puts us into
this very compromising position that
we’re in now the same compromising
position that MO coast of Europe put
themselves in by weaning themselves off
of nuclear energy as a good example so
these problems can be addressed but it
requires us to acknowledge the fact
there are no Solutions there are only
Alternatives just like Dr Thomas Soule
teaches us therefore we have to sit down
and use some critical thinking and just
go through a cost benefit analysis and
then take some intelligent adult type
action
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