Zeihan argues that with 1 to 1.3 billion barrels of crude never produced and delivered as of the third week of June, draining global inventories to record lows, the US government under a populist like Trump will absolutely restrict energy exports to keep domestic prices down, even though every available option carries severe side effects. He lays out two paths: the legal option of ending all oil exports (a power Congress granted the president under Obama), which would trap crude domestically and likely send US prices negative for lack of storage while imploding the shale patch; or restricting the roughly 5 million barrels per day of refined product exports—a power Congress has not granted—most plausibly via a heavy export tax suited to Trump’s preferences. He concludes the administration’s choice will likely become clear within a couple of months because the situation is nearing a breaking point.
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The supply shortfall and inventory drawdown: As of the third week of June, 1 to 1.3 billion barrels of crude went unproduced and undelivered, draining global inventories to record lows. Even if the Strait of Hormuz reopened tomorrow, Zeihan says it would take years before Persian Gulf producers are back to full output, forcing demand destruction through a protracted sharp price spike.
Option one, the oil export ban: Congress granted the president authority under Obama to halt all oil exports by decree, which would trap crude in the US and likely push domestic prices negative because storage is already low and there is nowhere to put it. Zeihan compares the potential negative-price scenario to what oil producers experienced during COVID.
The refinery mismatch: Flooding the system with domestic light sweet crude hurts US refineries designed for the imported heavy sulfur-laden crude of the pre-shale era. Refiners that dragged their feet on retooling since the 2010 shale boom would be hosed, facing high refinery losses or actual damage from running the wrong crude.
Shale collapse and product loss: Zeihan projects an implosion in the shale field because producers won’t drill if they can’t export, wiping out export infrastructure built around Corpus Christi over the last decade. The net effect would leave only roughly one to two million barrels per day of product, skewed toward gasoline, diesel, and jet fuel.
Option two, the refined product export tax: The US exports about 5 million barrels per day of refined product—more crude-equivalent than any nation has ever exported—so trapping it domestically would immediately hit global supply and prices. Since Congress hasn’t granted this power, Zeihan says the most effective and Trump-friendly mechanism would be a large export tax that raises US prices modestly while avoiding a domestic supply shortage.
