Is another burst of inflation coming?

[SharperDingaan]

At some point you're just the caretaker. There is no incentive to grow the pile beyond inflation and whatever your needs are likely to be; status quo is fine. When the heirs eventually inherit they can do what they want with it, but until then ... it is none of their business.

 

SD

Edited April 17 by SharperDingaan

[Hoodlum]

IEA Chief says it could take up to 2 years to restore Oil and Gas production in the Middle East back to close to where it was before the war.  That is assuming there is no further damage to pipelines and facilities.

 

https://oilprice.com/Latest-Energy-News/World-News/IEA-Chief-Says-Oil-Gas-Recovery-Could-Take-Two-Years-After-War-Damage.html

 

It could take up to two years to restore a meaningful share of oil and gas production lost in the Iran war, according to International Energy Agency chief Fatih Birol.

 

That timeline matters because markets are still treating the disruption as temporary. It isn’t.

 

Oil fields, refineries, and pipelines have sustained damage across the Persian Gulf. The Strait of Hormuz has also been largely shut, cutting off a key export route for crude and fuels. Together, those disruptions have removed hundreds of millions of barrels from the market.

 

In an interview with Bloomberg’s Wall Street Week, Birol pushed back on the idea that supply would return quickly once shipping resumes. Reopening the Strait does not bring production back to pre-war levels, according to Birol. Facilities would need to be repaired and output would need to be restarted.

 

Both take time.

 

Edited April 20 by Hoodlum

[Gregmal]

Classic first level thinking. The rest of the world’s oil producers are going to see elevated prices and….just wait for the Middle East to get back up and running? 

[SharperDingaan]

25 minutes ago, Gregmal said:

Classic first level thinking. The rest of the world’s oil producers are going to see elevated prices and….just wait for the Middle East to get back up and running? 

 

+1

 

You will also see new investment (beyond repairs/restarts) diverted from the Gulf to North America. European investment going into both expanded production from Canada's Jeanne d’Arc basin, as well as new pipe ...... to diversify their Gulf and Russian supplier reliance.  

 

chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.capp.ca/wp-content/uploads/2025/09/Canadas-Offshore-Oil-Gas-Industry-September-16-2025.pdf

 

Lot of denial, but the reality is that there will also be global investment in new, large scale, and state-of-the-art refining within North America. There cannot be security, when there is reliance on China (a future enemy?) continuing to refine NA crude, and then export the refined product back to the US.

 

Planes cannot fly with no gas ....  

 

SD

 

Edited April 20 by SharperDingaan

[Hoodlum]

35 minutes ago, Gregmal said:

Classic first level thinking. The rest of the world’s oil producers are going to see elevated prices and….just wait for the Middle East to get back up and running? 

 

You are only looking at it from an Oil production short term perspective.   Many of the related production facilities that are located in the Middle East (Petroleum, Helium, Fertilizer) have been damages as well, and those cannot quickly be replaced elsewhere due to limited facility production capacity in other regions.  The largest Aluminum production facility in the Middle East has also been damaged and it is expected to take a year to repair.  In the interim, Rio Tinto in Canada has helped pick up that gap but shifting more aluminum to the US, albeit with a 50% tariff that will get passed to the consumer until the Middle East can get back online.

 

Edited April 20 by Hoodlum

[Hoodlum]

13 minutes ago, SharperDingaan said:

 

+1

 

You will also see new investment (beyond repairs/restarts) diverted from the Gulf to North America. European investment going into both expanded production from Canada's Jeanne d’Arc basin, as well as new pipe ...... to diversify their Gulf and Russian supplier reliance.  

 

chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.capp.ca/wp-content/uploads/2025/09/Canadas-Offshore-Oil-Gas-Industry-September-16-2025.pdf

 

Lot of denial, but the reality is that there will also be global investment in new, large scale, and state-of-the-art refining within North America. There cannot be security, when there is reliance on China (a future enemy?) continuing to refine NA crude, and then export the refined product back to the US.

 

Planes cannot fly with no gas ....  

 

SD

 

 

That is more of a long term solution.  Adding refining/production plants does not solve a 1-2 year gap in production where plants have been damaged in the Middle East.  It is not the oil price that will cause inflation as oil production can be quickly increased globally.  The production facilities for the oil/gas byproducts cannot easily be replaced globally in the next year or two.  That is where the inflation will occur. 

 

The war is not over yet and we may see a further escalation of damages to facilities in the Middle East.  This is the ongoing increase to inflation risk.

 

 

Edited April 20 by Hoodlum

[frommi]

Food prices will go up, because 30% of fertilizers/urea comes from the middle east. Its 35-50% of the input price of corn and wheat. Let this prolong 3 months and gemini is giving me estimates of CPI going up 2-4% from this alone.

[Hoodlum]

13 minutes ago, frommi said:

Food prices will go up, because 30% of fertilizers/urea comes from the middle east. Its 35-50% of the input price of corn and wheat. Let this prolong 3 months and gemini is giving me estimates of CPI going up 2-4% from this alone.

 

We will first see this from imported foods from Asia as they are being impacted now from the Fertilizer price increase.  Asia will need to choose between passing through higher fertilizer costs or using less fertilizer for lower yield.  The end result of higher food cost is the same.  

In NA we will only see this based on the amount of damage to fertilizer facilities as we generally won't need it until we start buying fertilizer later this year for next spring.

[Gregmal]

1 hour ago, SharperDingaan said:

 

+1

 

You will also see new investment (beyond repairs/restarts) diverted from the Gulf to North America. European investment going into both expanded production from Canada's Jeanne d’Arc basin, as well as new pipe ...... to diversify their Gulf and Russian supplier reliance.  

 

chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.capp.ca/wp-content/uploads/2025/09/Canadas-Offshore-Oil-Gas-Industry-September-16-2025.pdf

 

Lot of denial, but the reality is that there will also be global investment in new, large scale, and state-of-the-art refining within North America. There cannot be security, when there is reliance on China (a future enemy?) continuing to refine NA crude, and then export the refined product back to the US.

 

Planes cannot fly with no gas ....  

 

SD

 

Stealth market share "realignment" really. 2-5 years to "open back up" over "there", while here in NA, those already off and running are gearing up and expanding infrastructure. 

[rogermunibond]

1 hour ago, SharperDingaan said:

 

+1

 

You will also see new investment (beyond repairs/restarts) diverted from the Gulf to North America. European investment going into both expanded production from Canada's Jeanne d’Arc basin, as well as new pipe ...... to diversify their Gulf and Russian supplier reliance.  

 

chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.capp.ca/wp-content/uploads/2025/09/Canadas-Offshore-Oil-Gas-Industry-September-16-2025.pdf

 

Lot of denial, but the reality is that there will also be global investment in new, large scale, and state-of-the-art refining within North America. There cannot be security, when there is reliance on China (a future enemy?) continuing to refine NA crude, and then export the refined product back to the US.

 

Planes cannot fly with no gas ....  

 

SD

 

 

There's literally de minimis Chinese export of refined products into the US.  Canada tons but not the US

 

If I was Australia, Japan, SK, yes, that would make sense.

 

[SharperDingaan]

19 minutes ago, Gregmal said:

Stealth market share "realignment" really. 2-5 years to "open back up" over "there", while here in NA, those already off and running are gearing up and expanding infrastructure. 

 

Lot easier said than done though; that infrastructure ain't gonna happen without some pretty sizeable off-take agreements, and matching federal investments, to kick off the seed financing. Down the road, most would also expect a Churchill/Newfoundland pipeline fork on a pipeline going west to east .... mitigating against Hudson Bay freeze up. Big pipe, hostile conditions, and lots of it = serious financing required.

 

SD  

[Ulti]

3 hours ago, Hoodlum said:

 

That is more of a long term solution.  Adding refining/production plants does not solve a 1-2 year gap in production where plants have been damaged in the Middle East.  It is not the oil price that will cause inflation as oil production can be quickly increased globally.  The production facilities for the oil/gas byproducts cannot easily be replaced globally in the next year or two.  That is where the inflation will occur. 

 

The war is not over yet and we may see a further escalation of damages to facilities in the Middle East.  This is the ongoing increase to inflation risk.

 

 

https://www.wsj.com/world/middle-east/u-a-e-asks-u-s-for-a-wartime-financial-lifeline-3f9ea3a0
 

what if these countries run out of money to help pay for repairs… UAE gets 170 billions from oil and oil production…Saudi Arabia is cutting back… lots of us and allies military assets in the area… I could easily see a karg island takeover more escalation /much more damage in the region . In addition , us oil producers have been burned 2or 3 times this decade… I expect them not to be aggressive until they see$80 for awhile…. Meanwhile all the ancillary stuff it takes to make pipelines refineries 

etc have gone up in price ( companies that produce these services also see $80+ oil now and raise prices)… I agree that this is going to be with us awhile and will cost more .. Jack McClendon , a n oil producer interviewed on Odd Lots today was very informative ( technically challenged to produce link)

 

 

 

[Hoodlum]

24 minutes ago, Ulti said:

https://www.wsj.com/world/middle-east/u-a-e-asks-u-s-for-a-wartime-financial-lifeline-3f9ea3a0
 

what if these countries run out of money to help pay for repairs… UAE gets 170 billions from oil and oil production…Saudi Arabia is cutting back… lots of us and allies military assets in the area… I could easily see a karg island takeover more escalation /much more damage in the region . In addition , us oil producers have been burned 2or 3 times this decade… I expect them not to be aggressive until they see$80 for awhile…. Meanwhile all the ancillary stuff it takes to make pipelines refineries 

etc have gone up in price ( companies that produce these services also see $80+ oil now and raise prices)… I agree that this is going to be with us awhile and will cost more .. Jack McClendon , a n oil producer interviewed on Odd Lots today was very informative ( technically challenged to produce link)

 

 

 

 

I am not concerned about them getting money, but they will need to give something up in return.  The US oil producer will likely wait a few more months with $80 before they commit.  In general I am not too concerned about oil as that can ramp up quickly once a decision is made.  My concern is the time it will take to repair the facilities for the downstream products produced from oil and gas in the Middle East.   This takes much longer to either repair or build elsewhere.  It is these areas where price increase with stick with us longer and increase core inflation.
 

[Castanza]

5 hours ago, Hoodlum said:

 

You are only looking at it from an Oil production short term perspective.   Many of the related production facilities that are located in the Middle East (Petroleum, Helium, Fertilizer) have been damages as well, and those cannot quickly be replaced elsewhere due to limited facility production capacity in other regions.  The largest Aluminum production facility in the Middle East has also been damaged and it is expected to take a year to repair.  In the interim, Rio Tinto in Canada has helped pick up that gap but shifting more aluminum to the US, albeit with a 50% tariff that will get passed to the consumer until the Middle East can get back online.

 

Do all the other refiners, chemical plants, etc. outside of the Middle East run at 100% capacity? I understand the bottleneck is oil, but IF some supply say a few percentage points can be made up from other markets why can’t the refiners or chemical producers not also scale up a few percentage points if they are not running at 100% capacity? 
 

Perhaps an ignorant question but I haven’t seen it mentioned anywhere. I’m of the mindset that people are good at solving problems and unknown solutions generally pop up to unexpected interruptions.

[Hoodlum]

59 minutes ago, Castanza said:

Do all the other refiners, chemical plants, etc. outside of the Middle East run at 100% capacity? I understand the bottleneck is oil, but IF some supply say a few percentage points can be made up from other markets why can’t the refiners or chemical producers not also scale up a few percentage points if they are not running at 100% capacity? 
 

Perhaps an ignorant question but I haven’t seen it mentioned anywhere. I’m of the mindset that people are good at solving problems and unknown solutions generally pop up to unexpected interruptions.

 

If existing plant had the capacity we would already see them filling the gap, as it has been almost 2 months now.  The Middle East was a large producer for many of the areas.  For example, 30% of fertilizer globally went through the Strait of Hormuz.  25% of Global Polypropylene also goes through this Strait.  There is the short term impact of not shipping product, but then comes the longer term impact due to damaged facilities that need to be repaired.

 

This is an interesting article on Helium that will also be significantly impacted due to damage to LNG facility, that are setup to product Helium in Qatar.  Again, facilities would need to be built elsewhere to replace this production.  The projected Helium shortage is already at the critical stage as it will take years to get back the production from Qatar, and this is a vital input for critical industries.

 

https://www.asiapacific.ca/publication/iran-conflict-sparks-helium-shock-threatens-global-chip

 

In Brief

• The conflict in the Middle East has fractured the global helium supply chain, taking a significant share of production offline for an element with no viable substitute. A critical input for semiconductor fabrication, fibre-optic manufacturing, and the aerospace industry, helium is classified as a "critical mineral" by Canada, Japan, the European Union, and others. 
   
• Accounting for roughly a third of global helium production, Qatar’s output was severely disrupted after Iranian attacks on the Ras Laffan and Mesaieed LNG facilities forced state-owned QatarEnergy to halt operations in March. Since helium is typically extracted as a byproduct of natural gas processing, the halt has also suspended helium production. Qatar has said repairs to its LNG capacity could take up to five years.
   
• Canada holds one of the world's largest helium endowments, but its longstanding reliance on the U.S. for final processing — the step that transforms raw helium into a high-value, exportable product — has left Canadian industries vulnerable to supply disruptions.
   

What’s Next

1. Canada could step up as an alternative supplier

Unlike most producers, where helium is a byproduct of natural gas drilling, Canada’s geology allows for direct helium extraction. This enables lower emissions and reduces exposure to energy market volatility. With geopolitical risk present across all major suppliers, global stakeholders are looking to Canada as a natural long-term alternative.  Saskatchewan is already moving ahead with plans for Canada's first liquefaction hub, aiming for a 10 per cent global market share by 2030. Realizing that goal will require significant investment in the infrastructure needed to bring Canadian helium to markets.
 

2. Other critical resource shortages warrant attention

Beyond helium, several industrial staples are under strain. Sulphur, a byproduct of oil and gas refining, is a key feedstock for sulphuric acid, which is essential for processing critical minerals. The Middle East accounts for roughly 24 per cent of global sulphur production and around 50 per cent of global seaborne sulphur trade, nearly all of which passes through the Strait of Hormuz. Beijing's planned halt on sulphuric acid exports from May threatens to tighten supply further, adding pressure on the mineral industries and the supply chains built on them.

 

Edited April 20 by Hoodlum

[SharperDingaan]

34 minutes ago, Castanza said:

Do all the other refiners, chemical plants, etc. outside of the Middle East run at 100% capacity? I understand the bottleneck is oil, but IF some supply say a few percentage points can be made up from other markets why can’t the refiners or chemical producers not also scale up a few percentage points if they are not running at 100% capacity? 
 

Perhaps an ignorant question but I haven’t seen it mentioned anywhere. I’m of the mindset that people are good at solving problems and unknown solutions generally pop up to unexpected interruptions.

 

Can't run at 98%+ capacity for any length of time, without both reliable feedstock supply and egress. It's also a lot wiser to only support existing customers (for future considerations), with any incremental production squeezed out. Then .... if you can avoid having to deal with the hostility and tariffs of the US .... a big plus.  

 

SD

[Blugolds]

2 hours ago, Castanza said:

Do all the other refiners, chemical plants, etc. outside of the Middle East run at 100% capacity? I understand the bottleneck is oil, but IF some supply say a few percentage points can be made up from other markets why can’t the refiners or chemical producers not also scale up a few percentage points if they are not running at 100% capacity? 
 

Perhaps an ignorant question but I haven’t seen it mentioned anywhere. I’m of the mindset that people are good at solving problems and unknown solutions generally pop up to unexpected interruptions.

1 hour ago, SharperDingaan said:

 

Can't run at 98%+ capacity for any length of time, without both reliable feedstock supply and egress. It's also a lot wiser to only support existing customers (for future considerations), with any incremental production squeezed out. Then .... if you can avoid having to deal with the hostility and tariffs of the US .... a big plus.  

 

SD

 

Like sharper said, there is more to it than just turning the dial up to 100%. Logistics, tanks for storage, tank balance, if a refiner has the ability to run higher rate, they likely would already be doing it as they would view anything less as leaving money on the table. Also there are "unsexy" needs for the process that dont translate directly to the bottom line and thus are generally the last to get upgraded but needed none the less for higher rates, rundown cooling, waste water plants for byproducts, coke removal and shipping/storage and this is to say nothing of the increased strain/shortened catalyst life, your projected run shrinks as you run it harder. There is a lot to it. A refinery likes to run just below peak, think of how your car behaves with the cruise on at 60 vs when you floor it wide open for an extended period of time, its fine if you floor it to merge with traffic for 10 sec but you wouldnt take a 500 mile trip with the redline pegged and not expect something to happen, when that happens, units come down and then you lose total production from that unit, and often supporting units for however long the shutdown takes it can end up being a net loss of overall production, running 90% smooth for 12 mo vs WFO for 9 months and down for 3 months. Thats the business, find out where that line is, is it 90% or 91% that yields the most stable operation and maximum production.