[noemon]

We are one miscalculation short of a Middle East firestorm and the next world oil crisis
Another energy catastrophe looms amid an unholy alliance between Iran, Russia and China

AMBROSE EVANS-PRITCHARD

The strange calm on world oil markets is unlikely to survive the blockade of Gaza, let alone an Israeli land invasion and the total eradication of the Hamas regime.

The only way to knock out Hamas is house-to-house, block-to-block, urban warfare. “This could take several months,” said Alex Plitsas from the Atlantic Council.

It will also put intolerable strain on the international system. As US secretary of state Antony Blinken said in Jerusalem on Thursday: “how Israel does this matters”.

Gaza’s supply of food, water, power, and fuel have already been cut off. Arab street sentiment will harden as the enclave turns into hell on earth and Palestinian deaths climb into the thousands, forcing reluctant governments across the Middle East to line up behind the fraternal cause, whatever their geopolitical quarrels with Hamas and Iran’s Axis of Resistance.

The grand bargain between the US, Israel and Saudi Arabia is already a dead letter. This has large implications for oil at a time when the crude market is already in deficit and prices are at the upper band of their historical range – pushed higher by Saudi and OPEC production cuts of two million barrels a day (b/d), otherwise known as cartel price manipulation.

The unspoken terms of the deal were that Saudi Aramco would feed back one million b/d as a unilateral gesture. But this depended on Israel beefing up the Palestinian Authority on the West Bank, one reason why Hamas was so determined to thwart it. The accord is now almost unthinkable.

One can only assume that Hamas intended to provoke total conflagration by decapitating women and children in the worst massacre of Jews since the Holocaust. Events must now follow their Sophoclean script with a haunting inevitability.

There must be a high risk that the unstoppable chain of events will trigger an assault by the Lebanese Hezbollah, backed by Iran and armed with 150,000 missiles on the northern Blue Line, in turn spreading to Syria. Israel bombed Damascus and Aleppo airports in a preemptive strike on Thursday. “The longer the war, the greater the probability that Hezbollah joins in,” said Dr Walid Abdel Hay, a Jordanian political analyst.

Everybody knows the stakes by now: we are one escalation away from a showdown between Iran and the Western democracies, which are broadly standing behind Israel, as they must after the savagery of the Hamas attack.

What began last year as a Russian 10-day special operation in Ukraine is morphing into a shadow world war on three fronts, with the West facing an unholy alliance of Russia, China, and Iran, all operating with some degree of collusion.

There is a disturbing amount of political chatter in Iran that a) the US is now so bogged down with Ukraine and Taiwan that it cannot step up to the plate in the Middle East, and b) that Europe is facing such a cost of living crisis that it is effectively crippled. This sort of thinking is how calamitous miscalculations occur.

While Beijing calls for “restraint” on all sides in the Levant, the state-controlled media entirely skips over the character of the Hamas attack. It blames the US, just as it parrots Kremlin propaganda on the war in Ukraine.

The league of autocracies is growing bolder as the West depletes its ammunition stocks and starts to fray along multiple lines of cleavage. The suspected Russian sabotage of the Finnish-Estonian gas pipeline this week crosses into Nato territory. The fight is being taken to us.

This clash of political civilisations is happening at a time when G7 sovereign debt ratios are already at or near record levels, with fiscal deficits on an untenable trajectory. We require wholesale military rearmament – 3pc to 4pc of GDP – but our democracies are not remotely ready for what this may mean.

President Joe Biden has until now turned a blind eye to an extra 700,000 b/d of Iranian crude finding its way around the sanctions and onto global oil markets. Uproar in Congress will put a stop to this.

All can now see that it has been funding the foreign adventurism of the Islamic Revolutionary Guard Corps. The Stop Harbouring Iranian Petroleum Act aims to sanction any bank, insurer, or ship, anywhere in the world, engaged in the illicit transport of Iranian crude. Few will dare to defy the long arm of the US Treasury.

Needless to say, no battle plan survives first contact with the enemy. Iran might retaliate by attacking flows through the Strait of Hormuz, the choke point for 17pc of the world’s crude supply and for Britain’s LNG gas from Qatar. There is also talk in Iran of reactivating Houthi allies in Yemen to attack tankers in the Red Sea.


The coming fall in Iranian supply will collide with an oil market that is already tight. The US strategic petroleum reserve is at a 40-year low. Mr Biden can no longer keep draining it at a pace of one million b/d – to win elections and keep drivers happy – without hollowing out the final emergency buffer.

The Chinese have been doing the opposite, adding 500,000 b/d to their strategic reserve for several months. This has fed speculation of stockpiling before an attack on Taiwan. One might equally ask whether Xi Jinping had wind of something else.


Should we fear a repeat of the Arab oil embargo of 1973 if a Carthaginian solution in Gaza is pursued? Not as such. The oil intensity of global GDP has dropped by 60pc over the last half century thanks to energy efficiency. It is down by more than 70pc in Europe. Most OECD states now hold 90 days of minimum reserves.

The Gulf states no longer have the stranglehold of the 1970s. The US is today the world’s largest producer of oil, due to the technological marvels of shale drilling. The Permian Basin alone produces almost 6m b/d, vaulting past Saudi Arabia’s Ghawar oil field. The US energy department expects American output to reach an all-time high of 13.4m b/d next year.

Nevertheless, ponder what might happen in a serious oil crisis. Some in Congress would push for controls on US crude exports, leaving Europe in the lurch, just as they pushed for controls on LNG exports last year. Wiser heads in both parties prevailed. That cannot be guaranteed in a world of $200 oil.

The market consensus is that an Arab oil embargo is today out of the question. Such action would supposedly undermine OPEC’s long-term future via three effects: it would accelerate energy efficiency, set off fresh waves of investment in shale fracking, and speed up the green transition.

I do not find this entirely compelling. Whatever OPEC says – it still forecasts booming oil demand through the 2030s – it is in fact maximising short-term revenues by trying to push prices to $100. It is already behaving as if it knows that Chinese car sales will be largely electric by 2025, and therefore that the long game is up.

The Gulf states clearly have no wish to quarrel with the West. Most (bar Qatar) loathe Hamas and would be quietly delighted to see Israel annihilate every last cadre. But these monarchies survive on the sufferance of public opinion. Emotions are running so high – and will run higher – that they may be forced into radical action to avert a revolutionary Gulf Spring at home.

The lesson for Europe, if we need another, is that the sooner we replace imported oil and gas from dangerous places with cheaper home-grown energy, the safer we will be.

Ambrose is one of the few good guys in the Telegraph. His analysis is quite spot on even if you disagree with some of his statements.

The west needs to disengage Russia and try to get it back on board or at least neutral.

Crimea and Donbass are 90%+ Russia, recognise them as Russian and give Russia the assurances it has been seeking for over a decade.

In return for Russia integrating with NATO and EU with some minor association agreement.

[annatar1914]

Ambrose is one of the few good guys in the Telegraph. His analysis is quite spot on even if you disagree with some of his statements.

The west needs to disengage Russia and try to get it back on board or at least neutral.

Crimea and Donbass are 90%+ Russia, recognise them as Russian and give Russia the assurances it has been seeking for over a decade.

In return for Russia integrating with NATO and EU with some minor association agreement.

@noemon :

Pan Turanism and Pan Islamic initiatives, growing in scope and in strength, will recalibrate international alliances worldwide in my opinion. But the West will have to change in order to derive some benefits from such a reset.

[Rancid]

Meh, the doom and gloom articles are just exhausting. We see this ad naseum. I've been reading some version of doom for the last 20 years.

Anyway,

China's slowing and possibly collapsing economy will keep oil prices down. China is a net oil importer, they are more dependent on the international system than the US (which is why Xi's geopolitical maneuvering makes no sense, supposedly through his "anti-corruption" purges, he has gotten rid of the actual smart people that know how the world works and could advise him properly). Ripple effects from that will be (relatively) minimal as China's economy is export based and not consumption based. Meaning, China's economic problems has less of a global consequence than the US's economic problems. Anyway, what it means is higher prices for shit we don't need anyway, and by the way, we already see the initial effects. That is what all the inflation is. Aside from that, we are seeing re-shoring and near-shoring at a rate the rivals the industrial build up during WWII (some argue even larger than that). This is happening in US/Europe and other US/EU allies (Japan/Korea/Phillipines/Vietnam/Mexico/Canada).

Long term, we will see a higher cost environment and higher inflation environment. Inflation pressure will remain until more manufacturing capacity is built up outside of China (which his happening). Any sort of oil crisis will certainly collapse the Chinese economy well before any western advanced economies. His point about oil reserves is just noise, and not looking at this at a more fundamental level.

The one thing everyone needs to get used to, is not being able to buy so much cheap shit (they don't need anyway). The insane low energy costs we've enjoyed was always going to be ephemeral, not permanent. People will need to accept that reality and re-adjust accordingly, but they/we will be fine. In fact, the working classes could potentially benefit as now we are forced into a situation of paying more for stuff by moving industrial capacity closer to home. More jobs in EU, US, Canada, Mexico, Japan, Korea, etc. etc. Working classes of those nations may benefit at least some. Whether we want to or not, we have to accept higher prices for stuff is here to stay, and that should be ok, especially if we can make sure it helps workers. It's also better for the environment.

Also, the idea that the US cannot sustain support for Ukraine (& Israel), is . This is a question of political will, and how effective propaganda campaigns of either side are with respect to swaying voters. It's not an issue of money or supplies.

Also "alliance" between Iran, Russia and China.. in particular Russia and China . Their interests are not aligned, especially since they have antiquated imperialistic views of the world. They are merely friends of convenience for now. Putin and Xi have both bought their own bullshit propaganda. Those two men of history will quickly throw each other under the bus once that convenience is gone.

The author doesn't understand that there's double edged sword for everyone here. My thesis is, the double edge will be more challenging for Russia/China/Iran than US/EU (and allies). It will also be hurt more for the EU than the US. However, EU has the intellectual and economy capacity to navigate it better than what Russia/China could do. They should be doing exactly what the author is saying though. Find ways to not be dependent on imported energy. This will make the transition less painful. EU also has a higher quality network of allies to plug into as well for any stop gaps during this process (LNG is an example of this, not ideal for EU, but it gets them by until they can figure something else out).

The long term global transition I'm talking about is going from a globalized economic world with China as the world's factory, to more of a regionalized economic world where there are multiple factory centers around the world, serving specific regions of the world. In that sense, China and Russia will get the multi-polar world they wish for. However, it will be to their detriment.

[Rich]

The only way to knock out Hamas is house-to-house, block-to-block, urban warfare. “This could take several months,” said Alex Plitsas from the Atlantic Council.

How do these Liberal "experts" get away with spouting this drivel.

Let's be absolutely clear about this. There is one way and one only to remove a numerous embedded resistance organisation from a population and that is to exterminate the whole population.

In the good old days you could get away with exterminating the men and selling the women and children into slavery, that was the Roman's final solution to the Carthaginian question, but such a soft hearted policy won't work in the modern world. Hitler had a similar problem with extremist Czech nationalists in Bohemia and Moravia. These people seemed to think they had a God given right to their own state and get this they seemed to think they had a right to complete sovereignty, no recognition that their sovereignty should be negotiated with the Germans. These extremists disrespect for the German authorities went so far that they assassinated the Protector of Bohemia and Bohemia.

But surely the Germans put a stop to the Czechs by genociding just a couple of villages? I don't think they even killed the women and children. They suppressed the Czech Nationalist extremists, they didn't eliminate them, the moment the German armed forces stood down in Czechoslovakia the Czech extremists jumped out took over the government and drove the Germans out of lands that they had occupied for over a millenia. Its the same story every where you look. Hard men like Hitler, Saddam, Hafez Assad used terror to suppress extremist (or what they considered extremist) groups, but the moment you let off with the terror the extremists spring back up.

Joseph Stalin was no softie, but it took him years to put an end to guerrilla resistance in the Ukraine after WWII, he was more than willing to use the terror, but again as soon Gorbachev eased back on the terror, the extremists sprang up and started renaming every other road to Bandera, Avenue or Bandera Cresccent, Bandera Close etc, it must be a nightmare to drive around.

The Israelis have demanded that civilians leave Northern Gaza. How in God's name will that help? What's to stop the Hams fighters leaving with them? When you let the civilians return the fighters can return with them.

[Rancid]

The Israelis have demanded that civilians leave Northern Gaza. How in God's name will that help? What's to stop the Hams fighters leaving with them? When you let the civilians return the fighters can return with them.

Since Israel decided to take the "Kill'em all approach" from a political messaging standpoint. However, they realize that they really cannot do that, as you stated. It's not the "good old days". Basically, you are right, this will not end. Not by force or otherwise.

[noemon]

Also, the idea that the US cannot sustain support for Ukraine (& Israel), is . This is a question of political will, and how effective propaganda campaigns of either side are with respect to swaying voters. It's not an issue of money or supplies.

The idea that the US can sustain anything or anybody has already been flushed down the toilet numerous times over.

Why do you think Israel has been swinging in Ukraine while refusing to offer any kind of support to the country? And at the same time signing deals with China? Because the Israelis know and understand full well how dangerous it is to put all your eggs in one basket and to estrange other big dogs.

What would you say to the Kurds? Or the Greeks in Cyprus? or the Armenians? or to the Lebanese, Syrian, and Israeli Christians?

"sorry guys, we effed up?" What good is that?

The fact is that the US is unable to do most of what most people imagine.

First of all, the US enjoys only a tiny qualitative tech advantage, second and most importantly, that advantage is quickly evaporated once you account for cost.

The US and the West need several orders of money more than Russia and China to produce the same amount of shells, bullets and rockets.

Giving both Russia and China a competitive advantage in arms over the US and the West. Russia can produce 1 shell for let's say pennies, while the US needs tens of dollars. Bullets, Rockets? Even worse.

Add to this the fact that both China and Russia are debt-free, while 95% of western countries are at over 100% debt of GDP and you see the bleakness of actual reality.

10 billion a year the US spends in Israel's iron-dome, throwing away dollars against fireworks.

It would cost less money to resettle all Palestinians and Jews in the US instead.

[QatzelOk]

I like your mentionning of an upcoming world oil crisis, like in the early 70s.

Imagine if you'd known a month ago, that Israel and Hamas would be at war again. If you had invested then in arms and oil stocks, you would be very rich right now.

A world of inside trading ends in warfare. Insider trading is a form of cheating which has created many of our current billionaires. It goes hand in hand with influence peddling.

This is an angle that discussions on world politics (especially regarding Israel) needs to take. Economic cheating can lead to the deaths of billions of people, and yet this kind of cheating is currently normalized among our 1%.

Look at all the "successful" trades of Nancy Pelosi, or Bill Gates's investment into vaccine research and distribution. They all have inside information, their hands on State Power and exclusing information about upcoming policies, and they invest in stocks over which they can have a strong influence through policy or investment elsewhere.

Or look at how rich all those real estate dealers got as the USA was "cleared of injuns" from the Atlantic to the Pacific a few hundred years ago. Or how rich certain wealthy insiders got off all the European Crusades of a thousand years ago.

Insider Trading is Us.