Congratulations Mr. President. What’s your encore?
Long Feared Oil Squeeze Arrives
The Wall Street Journal reportsThe Long-Feared Persian Gulf Oil Squeeze Is Upon Us
“In the whole written history of the strait, it has never been closed, ever,” said JPMorgan Chase analyst Natasha Kaneva. “To me, it was not just the worst-case scenario. It was an unthinkable scenario.”
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On Saturday, the Abu Dhabi National Oil Co. signaled it too was slowing production so tanks didn’t overflow. If the strait is still closed this Friday, daily output in the region could fall by more than four million barrels, Kaneva estimates. The decline could reach around nine million by the end of March, representing almost a 10th of global demand.
One week into President Trump’s war on Iran, the most severe shock to energy markets since the 1970s is cascading through the world economy. The disruption quickly fed into higher gasoline and diesel prices at the pump, and higher mortgage rates and borrowing costs for the U.S. government, endangering Trump’s economic priorities.
To be sure, the U.S. has more shock absorbers this time around. Oil is a far smaller component of gross domestic product than it once was, and the U.S. has become a top energy exporter in its own right.
Appearing Sunday on Fox, U.S. Energy Secretary Chris Wright said that “energy will flow soon” through the Strait of Hormuz. He blamed the rise in prices on “the unknown that this could be some long, you know, drawn-out crisis. But it won’t be.”
But the impact will still reverberate, especially in Europe and Asia. For decades, the U.S. military and its allies have spent billions of dollars ensuring the Strait of Hormuz stays open. Just 21 miles across at its narrowest stretch, and flanked to the northeast by a sworn enemy of the West, the channel between Oman and Iran is a superhighway for about a fifth of global supplies of oil and liquefied natural gas.
Source: SGT Report
