Russian refineries slowing down sooner than expected

Peter Zeihan here coming to you from Colorado. I’m afraid we need to do another oil update on the Ukraine war and it’s after effects.

Now, one of the problems that I had identified is between ship captains refusing to go into Russian ports and European dock workers refusing to unload Russian cargo and insurance companies not providing the indemnification that is required to sail in a war zone in the first place that the Russian pipeline system was going to back up all the way from the port to the well heads.

And when that happened, the Russians were gonna have no choice but to shut the entire system down or the system would fall apart on them.

Now that’s just the beginning of the problem, because once you shut stuff down in Siberia, and when you’re dealing with pipe systems that are literally thousands of miles long, before you reopen, you have to check every seal and every weld on every pipe section all the way through, and in time that it takes to do that, the wells will degrade, and you’ll probably need to re-drill most of them.

The last time the Russians shut everything in, it was 1989. It took them 32 years to get back to where their production was. They’d only reached that level last December. So big deal. I’d originally forecasted that was gonna happen this year, probably in two to three months, but things are happening faster than I anticipated.

Just yesterday, on March 22nd, we started hearing reports from multiple Russian refineries in different parts of the country that they were having to stop their runs because they didn’t have enough storage because they weren’t getting people to buy their stuff. The refineries that are of biggest concern in, first one is Salavat that’s in the city of Ufa in what is Bashkortostan. It’s one of the many republics in Russia.

It’s at a pipeline nexus.

And if there’s anything we know about a pipeline nexus is that the crude can go multiple directions. So there shouldn’t be any pressure at all. In addition, it’s in interior Russia. So if an interior Russia refinery is finding that it has insufficient storage for crude, that, I’m sorry, for refined product that is normally just sold within Russia. Big problem.

The second one is Kuybishev, which is in the city of Samara, which is the largest pipeline nexus nexus that the Russians have. So it’s the same logic holds.

But the one that worries the most is Tuapse down on the Baltic Sea coast, I’m sorry, not the Baltic, the Black Sea coast. This is a port. And if there is anyone who is willing to pick up Russian product at all, you know, they should be able to pick it up from there.

But the refining facilities are indicating that there’s just not enough storage, and they’re having to stop runs.

So instead of this happening in two to three months, we’re seeing it now. Now that’s suggests that within the next 30 days, we’re probably gonna see backups through the entire Russian system. So they’re gonna have to start shutting in production, which means that just a few weeks from now, we are going to have a very, very, very different sort of oil market cuz you’re looking at
4 million barrels a day of Russian crude. Maybe you’ll see even a little more just going away.

It’ll be the single largest disruption to oil markets in human history.

All right. So that’s enough about that. If you find this video or our newsletters or other videos useful, I recommend that you make a donation to the Afya Foundation, and that’s what we’re doing. The Afya Foundation provides medical assistance to Ukrainian refugees and the number has just ballooned. We’re already at three and a half million refugees having left Russia, plus at least another six million internally displaced persons within Ukraine itself. So I fully expect the number of total refugees to hit ten million within two months at this point. Right now about a third to half of them are in a single country, Poland, and the country is doing everything it can to accommodate them, but there’s just so many, and there’s so many more coming. So please, donate early donate often.

Okay. That’s everything for me. Until next time.