It would be relatively trivial for Iran to disrupt the maritime flow of oil using anti-shipping mines and fast boats. The most obvious risk to global oil supplies is a blockade of the Strait of Hormuz. That’s why the combination of cheap Russian energy with the manufacturing prowess of Germany and China petrifies the US political establishment - and it’s why a rapprochement between those three musketeers must be prevented at all costs. But if those foes could devise a means of becoming self-sufficient, they could threaten the US’s throne. It doesn’t have to rely on importing a significant amount of the oil needed to power its economic juggernaut, giving it a leg up on some of its economic enemies. Given that all economic activity is energy transformed, it is no surprise the US is the world’s preeminent economic superpower. The US is the largest global producer and consumer of the sticky-icky. I will be using the shorthand “mm b/d” to stand for a million barrels per day. Primer on Global Oil Supply and Demandīefore we jump into the meat of the analysis, I want to set the stage with some useful information on the global oil market. Given the news that Iran has recently reached 84% enrichment of uranium, it’s probably safe to assume that Israel and Saudi Arabia are currently assessing whether increased military action against the Iranians is warranted. Of all these hypothetical scenarios, the first one seems the most likely to occur at this stage. (This has already happened to the vital natural gas Nord Stream I and II pipelines between Russia and Germany.) Critical refineries and/or oil and gas pipelines are taken offline due to deliberate sabotage. Russia, Saudi Arabia, and/or other large oil producers decide to materially reduce their production of oil.ģ. Israel and/or Saudi Arabia decide to bomb a piece of critical infrastructure in Iran, and Iran finally decides to escalate by closing the Strait of Hormuz.Ģ. Here are a few examples of realistic potential situations that could cause a rapid rise in the price of oil:ġ. Together, these territories account for a large percentage of the global economy - and more importantly, their central banks enact monetary policy that, in the aggregate, determine how loose or tight financial conditions are globally. The countries/economic blocs in question are the United States (US), European Union (EU), China, and Japan. What would happen to the price of Bitcoin in the medium-term if oil ramped 2x to 3x overnight? To answer this question, we must guess at what the major global financial powers would do in response. And building off that premise, as investors, our directive is to forecast how Bitcoin would respond to such a scenario - because Bitcoin is pure energy converted into a digital monetary instrument via the mining process.įor this essay I will focus on oil’s supply, demand, and price as a proxy for global energy. Given that we are in a global conflict, the question is, if there were some major disruption in the availability of hydrocarbons that caused their global price to double or triple overnight, how would the major powers wield their weapons of monetary policy in response? To that end, some of the superpowers at war (and their fair-weather friends) are major swing energy producers - so it’s safe to assume that energy would be weaponised to inflict damage on those who do not produce enough of it domestically. If these things didn’t matter, the Middle East wouldn’t be such a geopolitically important place, and small city-states would not be permitted to host the FIFA World Cup in 40-degree Celsius heat using air-conditioned mega-stadiums built with mostly imported foreign labour. Since WW2, that has meant hydrocarbons.ĭon’t let the acolytes of Her Climate Royal Highness, Greta Thunberg, mislead you into thinking hydrocarbons such as oil, natural gas, and coal don’t matter. And given that everything produced by humanity depends on energy, all wars are won and lost on the availability of energy. In every war, the side that has won has always been the one that was able to most efficiently marshal resources towards its production of instruments of war. Instead, three nuclear superpowers (USA, Russia, and China) are sparring against each other on the physical battlefield through proxies (Ukraine), in cyberspace, in finance via sanctions, in semiconductors via virtual embargos, in space via satellites, and in mental health (largely via social media). World War 3 has already begun, whether the mainstream media and political elite wish to acknowledge it or not - it’s just not being fought using the same methods or in the same theatres of war as the last two.
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