In this episode, Michael Every analyzes the interconnected geopolitical and economic landscape, focusing on the Iran conflict, Russia-Ukraine escalation, and the potential for a global diesel crisis. He emphasizes that low oil prices don't reflect diminished risk, and discusses U.S. diesel export policy, the Greenland-Denmark defense deal, and stablecoin statecraft, urging investors to consider second-order effects and realpolitik in their market strategies.
Summarized by Podsumo
The risk of a global diesel crisis is underappreciated, with potential for record diesel prices despite low crude oil, as geopolitical escalations and export restrictions could disrupt supply.
Geopolitical conflicts (Iran, Russia-Ukraine) are at an impasse, with no clear path to de-escalation, making market positioning based on 'peace in our time' risky.
The U.S. may move toward energy protectionism, including banning diesel exports, which contradicts free-market principles but aligns with political incentives to lower domestic fuel prices.
The Greenland-Denmark defense deal gives the U.S. strategic advantages in the Arctic, including missile defense and economic access, potentially reshaping global power dynamics.
Stablecoin regulation is being positioned as a geopolitical tool, potentially enabling untraceable, dollar-backed financial flows that can bypass traditional sanctions and taxes.
"We have a global or a global diesel crisis... the risk is there if we don't get the right geopolitical outcomes and the right reactions from policymakers."
"At the moment, if you're an interest rate trader or an FX trader, you have to be an oil trader. You've got to look at that to understand what bond yields are going to do."
"So unless we are now pricing for peace in our time, which is as true in the Middle East as it is in Russia with Ukraine, unless you have discrete and distinct knowledge of when these wars will end, you are just hoping."