John Dizard: Energy Shortages Loom Despite Peace Deal

June 15, 2026 | In this edition of The Institutional Risk Analyst, we return to our friend John Dizard to update readers on the evolution of the global energy markets since our April 1, 2026 interview (“John Dizard: Watch for Rationing of Oil, Gas & By-Products”). The discussion was one our most read articles ever. Sadly, since April Fool’s Day, the situation in the energy markets and in Washington has not improved – even with the announcement of “peace” this weekend by President Donald Trump. Indeed, virtually no one in the Trump Administration or the big media is talking about the inevitable prospect of energy shortages or rationing as a result of the war with Iran. 

The IRA: John, thanks for talking the time from your busy schedule, what with the Iran war and also your great love, electricity and data centers.  So. How was your day, sir?

Dizard: Oh... you know, finding people, talking to chemical engineers, you know. Your basics.

The IRA: So, since we spoke and did that wonderful interview a while back, things have kind of tracked exactly as you expected. This war was not ending, as you can tell. Hezbollah basically said no to a truce as recently as this past week. But now President Trump has announced a peace deal with Iran. How do you assess things, you know, almost two months since we did our last interview?

Dizard: A complete lack of preparation by the government as a whole for what we're going to face. Cluelessness. I think that the Trump Administration and the rest of society are living on hope. Commercial people and corporations, even energy companies, have just accepted the government's guidance that this will be settled soon. What else can they say? So as a consequence, unlike, say, in Japan or Korea, certainly in China or even India, there just haven’t been any preparations for actual supply shortages.  We already have diesel prices that are going to be going up. If not hyperbolically, you know, very, very aggressively. And in the case of the Group III lubricants and even Group II lubricants that I've been obsessing about, we have an availability problem starting now.

The IRA: Despite your earlier comments, which were very specific, most people we know in the financial world are not predicting shortages. And these shortages are a fact whether the Iran conflict ends now?

Dizard: Yes. Consider high-end lubricating oil. You take what's called a base oil, which comes from a refinery, and then you put in additives for, say, winter or to avoid corrosion and oxidation. But they're simply not there. The shortages are hitting the formulators, the blenders right now. They just simply can't get supplies of high-end lubricating oil. It'll hit consumers over a lack of availability by the end of this month or beginning of next month. Group III base oil is already, when you can get it, it's at least $10 a gallon, but really, it's on allocation. In other words, if you have a special arrangement with refiners, for example if you're an auto OEM— original equipment manufacturer of autos or trucks— you'll get some factory fill supply. But retail gasoline or retail diesel distributors just won't have what they need. Now, this means that the auto and truck manufacturers are already saying to customers, "Well, you can stretch out your oil changes."

The IRA: How long can we extend the period for oil changes before it does damage to engines?

Dizard: Up to maybe from, say, 6,000 miles to 12,000 miles or even longer. But that depends on the quality of the lube that's already there. I think this will start creating serious problems for consumers by next month. They already have been seeing this indirectly because their grocery prices and prices of all kinds of goods that incorporate petrochemicals prices and incorporate diesel prices.

The IRA: Diesel is the fuel of the global economy. So you are predicting both higher prices for diesel and lubricants peace or no? That will almost certainly force the FOMC to hike interest rates.

Dizard: Correct. The diesel price increases that have happened so far are enough to increase prices all kinds of consumer goods already. That will now accelerate over the summer. People will be unable to do scheduled oil changes. You're a very informed and responsive consumer who likes fast cars. But a lot of people leave their oil changes until the little light goes on.

The IRA: So my idiot light goes on and I go to my auto parts store or dealer for five quarts of synthetic. What happens?

Dizard: They're not going to be able to get it. If you run synthetic in a truck or a car, you're basically SOL. That's a problem. The U. S. has become highly dependent on imported lubricants. For the higher end lubricants, Group III. as they're called, or Group IV, the U. S. imports about 70% of its requirements. Of that. 40%, between 40 and 50% has come—- until March—- from the Gulf, from refiners in the Gulf, and about 30% has come from South Korea. Neither of them are shipping product to the United States now. The Koreans have redirected their production to either domestic use and domestic OEMs, or maybe to some Korean OEM assemblers in the States.

The IRA: You mentioned earlier that the Iranians attacked the three key facilities in the Persian Gulf for producing synthetic lubricants.

Dizard: Yes. The Gulf producers simply aren't producing lubricants and other refined products. It's almost as if the Iranians knew what the precise pressure point to strike because they knocked them all out. The Iranians seem to be better informed than the US government.

The IRA: You said that Iran specifically went after three major facilities in the Gulf perhaps knowing that that this would bring the pressure to bear. But there's nothing we can do about this in the short term, is there, John? Let’s say that Trump’s peace deal sticks, will this solve the supply problem?

Dizard: No. We're going to be on allocation this year and into 2027. The trouble is that nobody we know— at the supplier level— is receiving any guidance from Washington. There's no coordination of how that's to be done. But the shortfall in supply is so severe, it looks as though it could impact the auto manufacturers as well.

The IRA: Well that is good news. Could we see interruptions in production by the global automakers?

Dizard: Yes. These high-end lubricating oils are required for hybrid engines and many other products. For CVT transmissions, for compressor lubricant. For turbine lubricant. Aircraft engines. Where you have aircraft, where you have high temperatures, high pressures, continuous use. If you use a less pure oil, you could get deposits and malfunctions. You'll get, well, certainly decreased fuel economy and you'll reduce engine life. And this becomes most evident most quickly to fleet operators. Most trucks, though, use slightly less refined or slightly less processed Group II lubricants, but the shortage pricing will be passed through to them as well.

The IRA: How have the global producers of these lubricants responded to the war and price increases?

Dizard: Production has actually been reduced in the past couple of months globally, even after the knockout of the Gulf suppliers, because refiners have seen such a rapid increase in diesel prices that they committed to producing diesel and jet fuel rather than other products. The Koreans, for example, committed their feedstock supplies to producing diesel rather than producing lubricants.

The IRA: That is an obvious choice right? You want to keep the trucks rolling. The price of fuel "at the pump," for example, is a political issue in any country, but especially in the US.

Dizard: Well, yes. You’d feel the shortage of diesel or gasoline, petrol immediately, whereas you might be able to postpone the lubricant use, but not forever. The immediate headline issue was a shortage of diesel. It's life-threatening in Africa, of course, and in Asia, too. But the lubricant shortage now compounds that because you you're going to see a tradeoff between diesel supply and the slightly heavier lubricant supply required for most trucks.

The IRA: And you’ve said that the shortages are happening now, today?

Dizard: Yes. For hybrids and higher performance engines, not enough supply is going to be available. Somebody's going to have to not drive their car. Manufacturers may have to slow or stop production because they can't do the fill at the factory. I think this will happen slowly. General Motors (GM) has been probably the slowest to react to the shortage. The Japanese manufacturers have already responded by stretching the limits of substitutes or how far they can go in stretching out recommended oil changes. They've advised dealers to tell customers to change their oil at twice the mileage that they did before. And so they're already doing that, but that might not be enough.

The IRA: There are some very smart people in the Trump Administration. Why are they ignoring this reality?

Dizard: The judgment of the government is: we're only a couple of days away from a solution and then prices are going to fall like a rock. This is not true. Part of the reason they think or even repeat this nonsense with such conviction, is that they only keep track of what their political advisors tell them to say. The voting public looks at prices of gasoline at the pump and the oil price.

The IRA: And oil prices have been falling.

Dizard: Well, no. The problem is when they look at the oil price, they're looking at the near-month futures that's not the same thing as what's actually physically delivered. The price for prompt delivery in Asia is far higher, especially for the grades that are in short supply. So, the political advisors are looking at the wrong indicators. And also, I think diesel is where we'll have a serious increase in prices. Diesel and jet fuel are both going to be problems. The government and the Trump administration has been taking credit for our high oil exports. Those export numbers include both oil and oil products. We've been exporting not only our excess sweet light crude and condensate from shale oil. We've also been exporting our inventories of diesel and diesel, and jet fuel in particular.

The IRA: Will the US be forced to curtail energy exports?

Dizard: Perhaps. These shortages are coming to us. The Europeans already have changed their jet fuel specifications to match the American ones, which have allowed them to import American jet fuel and use American jet fuel.

The IRA: When do the Americans stop exporting? Do you think that's going to come? When?

Dizard: The White House political advisors figure it's a crisis when they start hearing from people. I thought that the DOE was preparing for this. They have one engineer in a remote location who's studying it. They don't have a contingency plan for energy rationing. Seriously. That's the secret. That's the secret plan. There is no plan.

The IRA: Well based on what you are saying, they can't get to the midterm, John, obviously. So, by August, September, is this going to be on the front of most newspapers?

Dizard: Oh, absolutely. Well before Labor Day. Not only due to the lube oil shortage, but also the impact of inflation on the back-to-school season or the autumn season, of the impact on product pricing, products throughout the economy, food. Anything that has to be transported by truck. It'll be expensive, more and more expensive. It's not good.

The IRA: This seems like the oil crisis of the 70s redux. Gasoline and diesel fuel has been very cheap for decades, especially if you discount prices for inflation. The inflation rate has been pretty brisk but nominal energy prices have been stable. But now we're going the other direction. We're going to have very significant increases in the real cost of energy. And that's going to wallop this economy because we've been subsidized by the fact that energy prices were relatively low.

Dizard: Right. And the fact is that the US economy really is part of the global supply chain. We can't only use West Texas Intermediate or light shale oil for refining into diesel. We need medium or heavy crude, which we have to import. Now, we can import a bit from Venezuela, but not that much. Their infrastructure is not in great shape. We can't substitute what we were importing directly or indirectly, from the Gulf. And the gradual collapse, really, of these supply chains is going to become completely clear by the end of the summer.

The IRA: Can the US increase domestic production of diesel and lubricants to address these shortfalls?

Dizard: Unfortunately, there won't be time to do that much about it. There are new lubricating plants coming online in the States, one at the Chevron (CVX) Pascagoula, Mississippi refinery in the first quarter of next year, and the other, larger edition, really, in an expansion of facilities at Exxon's (XOM) Baytown Refinery, at the end of next year. And after that, there’s another new synthetic lubricant plant being prepared in North Dakota. That's going to come online way too late to be helpful here. Lots of people want to get lots of new plant built very quickly.

The IRA: And we cannot begin to repair the Gulf facilities so long as the war continues?

Dizard: You can't even really start on rebuilding facilities like, say, Shell's gas-to-liquids synthetic lubricant plant in Qatar, or repairing the Bahrain refinery or the Adnoc’s Abu Dhabi refinery, until you know the missile and drone attacks have really stopped. The Gulf States have set up— you know, warehousing for parts, and they've done surveys, they've done ordered parts, but to really start repairing these vast plants, they can't even start yet. It’s at least a $50 billion to $60 billion repair bill. Again, it's almost as if the Iranians knew more about our oil supply and our, you know, our oil product supply chain than the Trump Administration.

The IRA: Oh, I'm sure they did. They have very good people in the oil industry in Iran.

Dizard: I was, you know, making a rhetorical point. No, they definitely knew what they were doing to knock out specifically the key gas-to-liquids plant in Rastafari. That will take a long time to fix. And they left one train of the gas-to-liquids plant intact, which the Qataris have not restarted, just as a way of saying, 'Oh, by the way, we can knock that one out too.'

The IRA: The Economist put out a piece recently talking about how global GDP is going to be impacted by the war, but they didn't really talk about a prolonged shortage of fuels and lubricants at all.

Dizard: Well, there is a continuing focus on the crude prices or different crude prices like Brent or WTI. But I've never consumed a barrel of oil in my life. I only consume oil products. And what was really destroyed in the Gulf, it's not just a matter of escorting ships to the Strait of Hormuz. It's the disruption of the productive plant. And that's the problem. The Korean refiners can get up and running again with maybe four months delay. But the Gulf plants are offline until they get fixed. I think that supply disruptions of fuel and lubricants is going to be an acute issue going into the Fall elections. The lack of lubricants will create problems for a lot of consumers who were right at the end of their lubricant life cycle. For higher and higher emission standards and higher and higher fuel economy standards, you have tighter and tighter tolerances in engines. And those engines require high viscosity lubricant such as the Group III or Group IV or polyalphaolefins that have been affected by these disruptions. You simply cannot run those engines on lower quality oil without affecting their life or performance.

The IRA: What should the Trump Administration be doing to prepare? If you were advising President Trump, what would you tell him?

Dizard: Well, I'd say that Washington ought to set up some priorities, let industry carry them out, because even the DOE isn't particularly well equipped to do this. But I'd say you want to make sure you have enough turbine lubricant. You want to allocate lubricant so that there's not only enough for new cars, but also... some supply for consumers doing oil changes. You need to have trucks taken care of. You need to do it in a systematic manner rather than a haphazard manner. And it’s not enough to ration— to do price rationing here. Because... even manufacturers, even users, or blenders of these oils are already on allocation.

The IRA: Should the industry be getting together themselves? Because you know the way Trump is, he's going to want private industry to do this.

Dizard: Yes. The Trump Administration ought to get an antitrust waiver for the industry through Congress now. Cooperation would be a combination and restraint of trade, no doubt, legally. But it's also one that is required, I think, for the public's well-being. The government has to get involved to avoid this kind of antitrust liability or any other liability. Liability, for instance, for violating warranties. There's some legal consequences here where the industry does need the blessing of Washington, if not the organizing genius of the government. Because the energy industry, they can't really talk to each other. I mean, they can gossip, but they can't coordinate. The government must facilitate private industry cooperation and coordination. That would work. I mean, if it's done in a manner that's visible to at least the government, visible so that we can see that it's not simply a price-fixing deal, it can be done. But it has to be done.

The IRA: Thanks John.

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