Months ago in a hemisphere far, far away …
It is a period of great conflicts between old empires …
War fogs the Strait of Hormuz …
Drones swarm Ukraine - Russian battlefields …
Long-range drones destroy oil refineries hundreds of miles behind Russian lines …
Kinetic combat across the planet is a key feature of 2026. The action has centered around energy and some of the world’s great oil and gas fields. The zig zagging price of crude oil is a constant headline, a reminder of the central role that fossil fuels still play in AI’s 21st century economy. Upcoming mid-term elections also matter.
Since the Strait of Hormuz was attacked on 28 February crude oil has traded between $68 and $113 and is now $93, 27% higher than pre-war prices.
Brent and WTI crude prices reflect the ‘upstream’ part of the global energy complex where the crude is drilled from the ground. But you can’t put crude in your car, ship or airplane. Crude requires refining which is the ‘downstream’ part of the energy complex. It gets less headlines, but its role is just as important. Refineries use heat, pressure and chemistry to crack the hydrocarbon molecules and separate them into the numerous fuels and other by-products that enable and power the world economy. It is an expensive, dirty and messy process that requires massive industrial scale to be economically viable. The cost per barrel for the process is called the ‘crack spread’ and that has recently exploded to all-time highs, especially for diesel where the crack spread jumped to $101 up 400% year to date. Why?
Blame Ukrainian engineers, the world’s leaders in drone technology. On June 25th Ukraine launched a devastating 40-day drone blitz of 100 sorties against strategic Russian targets. Russia’s refineries were high on the list and they got hit hard, including the massive Omsk refinery complex in Siberia. As a result of the strikes 40% of Russia’s refining capacity is now offline. On July 8th Russia announced a ban on the export of diesel which is one of their major exports.
Ukraine’s 40-day drone blitz was a game changer, and its implications are important and ominous on several levels.
The world now confronts severe chokepoints in both the upstream and downstream parts of the global energy complex. This creates a new array of problems that will surely result in stranded assets with higher costs and higher prices to end users. That was the message of the huge spike in the diesel crack spread.
Refineries around the world are more vulnerable to possible attacks and surely more valuable due to the destruction of refining capacity over the past six months.
While the war goes on, Ukraine has demonstrated advanced capabilities of drones that will impact how and where battles will be waged for the foreseeable future. Like the rifled bore, the gatling gun and the tank, drones will change the battlefield and the tactics used on it. Military doctrine must adjust and mastering drone technology is an existential necessity.
Ashby Foote III is President of Vector Money Management and serves on the Jackson City Council, Ward 1. He is on the board of Bigger Pie.
