CounterPunch Exclusives

CounterPunch Exclusives

Oil’s Long Goodbye: From Shocks to Transition

Photo by Zbynek Burival

Back in March, when the Trump administration and the Israeli government initiated their attack on Iran, it didn’t take a prophet to foresee the potential for an energy disruption due to the Strait of Hormuz getting blocked off to at least some extent. With over 10 million barrels a day worth of oil blocked at its peak, along with 20 percent of the global economy’s liquefied natural gas (LNG), the blockade has caused the greatest energy supply disruption in history. At the start, some analysts were predicting oil could go as high as $200 a barrel. Instead, oil jumped to a peak of $103.90 sixteen days into the war and settled below that mark in the months after.

Of course, it is not all good news. The local effects of the disruption on poorer Asian countries have been real, the price of diesel fuel is nearing a record high, and, along with the disruption of fertilizer (before the war about a third of fertilizer passed through Hormuz) food prices could increase in the coming months. But this wasn’t the first time in recent history that there were predictions of skyrocketing oil prices that didn’t pan out. In July 2022, five months into the Russian invasion of Ukraine, JPMorgan Chase forecast that oil could have reached $380 a barrel. Indeed, the G7 was so spooked by the potential price increases with the loss of Russian oil, even as Russia is trying to conquer Ukraine, that it set up a price cap system, rather than completely cut off the Russian war machine. Yet, a few years later we see a far greater disruption and still no explosion in the price of oil.

How was the worst avoided? There have been some practical explanations: Saudi Aramco was able to maximize the East-West pipeline and the Red Sea to bypass Hormuz, at least until the Houthis began their efforts to block off that route. Now it is increasingly using a longer route through Egypt’s SUMED pipeline; some so-called ‘dark’ tankers (tankers that switch off their transporters), at least sometimes under the escort of the U.S. Navy, have managed to avoid Iranian drones; at last check, shipping through........

© CounterPunch