Ignoring the diagnosis doesn’t change the diagnosis.
-Common Sense
Low on energy? It’s not just you, it’s the global economy too!
Well, sort of.
You can still fill up your car, and gasoline prices have even eased a bit. But beneath that surface calm, we are running down our oil reserves–future energy, in effect–at the fastest clip in history,1 with the United States Strategic Petroleum Reserve (SPR) now back at levels not seen since the early 1980s.
So yes: “Houston, we have a physics problem.”
Let’s say you’re not feeling well. Maybe you stayed up all night watching the World Cup. Maybe the fourth slice of pizza was a mistake. Maybe you just drank too much. Those all have a cause and a pretty easy fix (basically, do the opposite). But what if you did everything right? Slept well, ate well, and still felt off? Then it’s probably not just last night; it’s an underlying condition. The most sensible move would be to get it checked out. Instead, after a little WebMD-induced panic, you ignore it. In fact, the next day, you feel much better. Must be nothing.
But ignoring the diagnosis doesn’t cure the condition. That’s essentially what we think energy markets appear to be doing today. We believe physical are telling you something is wrong (the underlying condition). Only the “price” is giving the all- clear, because for the moment, you don’t feel sick.
That helps explain the behavior of the oil market. Prices have stayed relatively calm not because the underlying problem has gone away, but because governments have been emptying the emergency pantry. The US has released oil from the SPR at an unprecedented pace, the International Energy Agency (IEA) has joined in with emergency stock drawdowns, and China has apparently been dipping into its own reserves as well.2
US Crude Oil Reserves Decline to 1983 Levels
At the same time, futures markets seem to be pricing in diplomacy, weaker demand, and eventual normalization.
Very comforting. Also perhaps not entirely connected to reality because the physical market is still flashing warning signs. Inventories are low, distillate stocks are scraping along near multi-decade lows, refineries are already running hard, and the tightest part of the market is in the medium-sour crude grades that Brent and WTI don’t fully reflect anyway.
So, what looks like calm may really just be temporary padding plus a healthy dose of wishful thinking. We think the paper market is pricing hope; the physical market is pricing scarcity. And once the temporary buffers run out, we think this probably doesn’t end with a gentle market shrug. In our view, it could end with a sharper repricing—and potentially the usual downstream gifts of higher inflation, tighter supply chains, and another reminder that energy still matters to, well, everything.
Which is another way of saying: When it comes to your health, quite often, you are what you eat. When it comes to the global economy, however, you are what you deplete.
Until next time.
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What We’re Listening To
This week, check out Adam Taggart’s Thoughtful Money podcast, where he discusses many of the issues we’re highlighting above with energy expert Jeff Currie.
END NOTES
1“Weekly US Ending Stocks of Crude Oil in SPR.” U.S. Energy Information Administration. 17 June 2026.
2Aizhu, Chen, and Sam Li. “China Seen Tapping Deeper into Oil Stockpiles as Imports Hit Decade Low.” Reuters. 2 June 2026.
DEFINITIONS
Brent Crude: A widely used benchmark for crude oil prices, based on oil from the North Sea. Investors and energy markets use it as a reference price for a large share of the world’s internationally traded oil.
West Texas Intermediate (WTI): A widely used benchmark for US crude oil prices. It reflects the price of a specific grade of crude oil traded primarily in the United States and serves as a key reference point for North American energy markets.
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