The Strait of Hormuz Oil Shock Is Now Heading West
bloomberg.com
bloomberg.com
This forcing function will occur regardless of who is in power. The world (China, mostly) produces enough EVs, solar, and batteries to make it happen, it’s just a matter of economics and time.
The people in charge today are temporary, the investments made in clean tech today will last decades.
https://ember-energy.org/data/china-cleantech-exports-data-e...
(China is ~1/3 of global manufacturing capacity)
Suppose that is true. Would it matter?
Oil is rarely traded in Euros but the Euro is still a strong currency.
Matter for what? IIRC, the USD is over-valued by about 10% due to being a world reserve currency.
End USD dollar dominance, and you get most of Trump's baseline tariffs forever, except on top of rather than instead of whatever extra tariffs Washington puts on imports and you can't undo them.
My first thought was to wonder about the inflationary impact of all the USD outside the USA ending up back in the USA, but then I remembered how macroeconomics has way too many feedback loops (and first-order surprises because of those feedback loops) for me to guess the full impact, especially given this isn't my field.
As, I suspect, will the damage to the civil service and the scientific community.
The appetite for the "boots on the ground" among the US public is almost zero. I doubt that even a large false flag would work at this point.
The hardest part of Trump's 2 week war is going to be the first six years.
Yes on feet. No on nuclear. Iran's economy, for the near term, is trashed. It's going to need to choose between sovereighty and wealth. If it chooses the formewr, it lacks the resources to complete the project. If it chooses the latter, it probably goes with China, which means its nuclear programme will be constrained.
> force the end of the PetroDollar in the process
Sigh. Petrodollar hypothesis hasn't been a thing for decades. Various countries price and settle oil in currencies other than dollars. Dollar demand due to oil is a vanishing fraction of total international dollar demand. Like, oil could swap to being entirely traded in Bitcoin and it might make the next Fed meeting's agenda.
https://www.wsj.com/finance/currencies/the-dominant-dollar-f...
80% of oil trade in 2023 in dollars. Mostly importantly, the gulf states do in exchange for US security guarantees, which Trump just blew up in spectacular fashion. Decades of Middle Eastern policy have just been undone because of the US half-committing to this war.
Compare oil trading as a fraction of dollar volumes in the 1970s, when petrodollar was a thing, to today. Also, the JPMorgan Chase estimate is almost certainly too high for dollar volumes in oil trading–I sat on a desk in Connecticut almost two decades ago and we traded oil settled for in sterling.
> gulf states do in exchange for US security guarantees
This is still 1970s geopolitics. The Gulf states get U.S. security guarantees in exchange for basing, foreign policy suzerainty, et cetera. We don't need Gulf money to finance our deficit anymore. (See: your article re. the UAE.)
Petrodollar is a fun thing to talk about. But it hasn't had explanatory or policy value since the Cold War. American consumption and capital markets drive global dollar demand. The petrodollar, if it has any use, is as a Big Mac index for general dollar use. It's a signal, not a driver.
(not a "petro pound" though!)
I think the main importance of the "Petroyuan" is simply sanctions evasion. The US claims jurisdiction over all dollar transactions, so countries need to use something else.
Correct. And I'm not saying tracking in what currency different commodities are settled isn't important. But it's as a signal of financial and trade flows. Not an end in itself. It was an end in itself in the 1970s, with the petrodollar and–far-more important to America–petrodollar recycling.
Dollar hegemony is built on American consumption, first, and capital markets, second. The power of the renmimbi rests in Beijing's production power.
I don't follow this at all? Is there some implication that selling oil to China is constraining sovereignty? Is there some nuclear deal between Iran and China I'm not aware of?
As an autocratic regime, they (IRGC) have no choice but to pursue not only sovereignty but domestic control.
> Petrodollar hypothesis hasn't been a thing for decades
Yeah, this has always seemed overstated. However it circulates in exactly the kind of rightwing paranoia circles which strongly influence the current US government.
China helping Iran rebuild means China getting more say in Tehran than they have right now. And to date, nuclear non-proliferation has been a serious issue for Beijing. I can't see China being thrilled about a new nuclear power one country away.
> it circulates in exactly the kind of rightwing paranoia circles which strongly influence the current US government
When did it make the jump from the far left to the far right?
The weird thing is practically every strategist has known this since the 1980s. Iran's geography means as long as it controls its Gulf-coast border, it can control the Strait.
I hope countries (or rather, voters) around the world are waking up to just how helplessly dependent they are on a resource they do not own and have to beg and scrape from others.
Pakistan is a slam dunk for renewables, it's ground swell and up there given the lack of decent state level delivery infrastructure.
It's a similar story across much of the developed world, easy to build out renewables from the ground up and good deals from China for countries of interest to the Belt and Road intititives.
In Australia:
73% support renewables and batteries as the fastest way to lower people's power bills, compared to just 16% for nuclear reactors and 8% for new coal power
In 2018, 84% of Australians said the government should focus on renewables, even if we need to invest more in infrastructure to make the system more reliable.
In the USofA ... dunno, that's more your sandbox - I suspect many hearts and minds have been captured by 50 years of the Koch Bros dunking on AGW and public transport leading to a broad excess of rolling coal types being mind tweakled by the Heritage Foundation and / or Taylor Sheridans Landman windmill rants, etc.
They may end up believing they are being impacted, but many will still deny or argue the root cause.
Technically no. The oil we export isn’t a fit for the oil we refine. We’re slaved to the global market, though our exports do give us a tool. (Unfortunately, it requires taxing oil production (since we can’t tax exports [1]) to pay for, ideally, a monthly cheque to every American, and less ideally, a refiner credit to push down domestic gas prices.
[1] https://constitution.congress.gov/browse/essay/artI-S9-C5-1/...
Might not be ignorance. There's still the strong possibility that "blackmail material" is floating around due to the island of one of Trumps old friends.
On the other, he did deny the affair with Stormy Daniels, so perhaps he's easier to blackmail than I think he is?
I wouldn't put it past him to go to war to protect such secrets, if he can conceivably frame it as something positive.
Now there seems to be virtually no patriotic sentiment except for the face-keeping from officials and some hardcore supporters who just repeat anything. But many Americans seem utterly confused.
Isn't that part of the plan.
You can outgun by far your opponents, and yet they can find cheap and effective ways to make you bleed in ways you cannot sustain for long.
This was already visible in Ukraine, where minor investments on Ukrainian side (like sabotaging gas pipelines, oil refineries or production plants) can lead to magnitude of orders outsized impacts on the war economy (and economy in general) for years.
Now Iran's showing how gargantuan has to be the US' and Israeli effort to prevent a major and long lasting choke on world economy that can be threatened by few dudes with a handful of drones/divers or small boats.
What good is a cheap drone if the operators aren’t just dead, but wiped from the Earth? Assuming the drone hasn’t been destroyed too, it sits idle. Or redeployed by American forces against the IRGC.
A glassed Iran and $50 oil is more preferred than to have $200 oil and environmentalists backed by Chinese money dictate my life.
US falling behind China. There’s a good possibility trillions allocated in datacenter buildout was misallocation of capital by markets.
No more cheap vacations abroad, cheap food, cheap goods from far away..
I bet we will see $400 oil...