larry johnson on oil and iran; 

 

The US/Israeli war with Iran has focused the world’s attention on oil because of the closure of the Strait of Hormuz. When the war started I thought oil was just oil. Okay… I was ignorant. But over the course of the last four months I have received quite an education from a couple of different experts in the field. If you want to understand one of the key reasons that Donald Trump signed the MoU, you need to understand why the US is dependent on sour crude oil, which comes out of the Persian Gulf. I will try to make it simple — About 65% of the US refineries are built to handle sour crude while the US oil industry primarily produces sweet crude. We need sour crude to produce diesel and aviation fuel. The closure of the Strait of Hormuz means that the US will not have enough sour crude to sustain current production levels of diesel and aviation fuel. That’s the problem in a nutshell.

The United States is the largest crude oil producer in the world, pumping close to 13.8 million barrels per day. It is also, paradoxically, structurally dependent on imported crude oil — roughly 6 to 8 million barrels per day of it in recent years. The war with Iran and the months-long closure of the Strait of Hormuz exposed this paradox in the starkest possible terms: a country awash in its own oil found itself draining its Strategic Petroleum Reserve at record rates to keep diesel and jet fuel flowing. The explanation lies in a mismatch between the kind of oil America produces and the kind of oil its refineries were built to run — and the barrel now bridging that mismatch is being pulled from salt caverns with a finite structural lifespan..........more...........