THE WORLD IS AN UNSTABLE PLACE!

 Weekly Opinion Editorial

by Steve Fair

The world is an unstable place.  It often seems things are hanging by a thread. Russia invaded Ukraine four- and one-half years ago.  That conflict has resulted in Russia occupying roughly 20% of the Ukraine, but at a cost.  Over 500,000 Russian soldiers have died in the war, with another 1.5 million missing or wounded.  Ukrainian solider deaths are estimated between 125,000 and 150,000, with another 500,000 missing or wounded. 

Ukraine has become a global leader in military drone technology.  Their drone technology has impressed governments and defense manufacturers around the world.  Ukrainian hit Moscow on Sunday with over 1,000 of those domestically produced drones that hit an oil refinery and several other targets. 

In the middle east, Saudi-led coalition forces fighting Yemen’s Houthis intercepted and destroyed the Iran-backed group's ballistic missile fired at Riyadh at dawn.  The group has already hit a Saudi pipeline, disrupting oil distribution.  That coupled with the worldwide shortage of refining capacity has driven up the price of gasoline and diesel. Three observations:

First, high fuel costs could impact upcoming midterm election.  The Economist now gives Democrats a 93% chance (up from 77% in July) of flipping the U.S. House and a

59% (up from 45% in July) of taking the Senate.  The increases for the Ds are primarily driven by higher prices for gasoline and food.  If Trump can engineer a deal with Iran and stabilize the area, most likely the price of fuel will quickly come down, which could create a shift back to the GOP. 

Second, the lack of refinery capacity is the real issue.  Crude oil doesn’t become gasoline on its own — it has to be refined, and the U.S. has been quietly losing refining capacity for years. The U.S. has 620,000 barrels per day less refinery capacity than it had in 2019.

That capacity is not coming back immediately and consumers pay the price for that capacity shortage directly at the pump.  Couple that with government environmental regulations and the Renewal Fuel Standard mandate, oil companies aren't willing to invest in new domestic refineries.  At a recent White House meeting, oil executives discussed the capacity issues and the Renewable Fuel Standard (RFS). The RFS requires oil refiners and importers to blend 15.5% for total renewable fuel and 6.42% for advanced biofuels in 2026.  The hickory nuts (oil field jargon for veteran) told Trump the blending targets are unattainable.  Whether the targets are relaxed remains to be seen.

Third, all politics are local.  Voter behavior and winning elections depend on how well a candidate addresses issues important to those voters.  Most of the time, national issues are not in the decision tree, with the exception of economic issues.  People vote based on how the Party in power has performed in keeping prices and taxes down.  Trump and the GOP led Congress did lower taxes through the 'Big Beautiful Bill," but the price of food and fuel have increased vs. two years ago.  While those high prices will likely come down, it may not be before the midterms.

It may look bleak for GOP in the midterms, but things can quickly change.  As Crown prosecutor Gérard de Ville fort said in The Count of Monte Cristo: “On what slender threads do life and fortune hang…!”