Peace? Oil prices?

[Jon Freise]

It has been a few weeks since I wrote anything about oil.

I would recommend reading The Escalation Trap by Robert Pape for frequent updates on the Iran War.

But it seems to be moving to back burner news.  That is an illusion.  Two things are happening at the same time:

First, some oil is leaking out of the blockade of the Strait through oil pipelines and shadow tankers.  That just means that strategic reserves and commercial stock piles are being drawn down more slowly.  The clock is ticking.  The physical economy is starting to slow.  Some parts of the world are being forced into rationing or even shutdown.  That means that even though we cannot see it, there is a ripple moving through the physical economy.  When a refinery shuts down, somewhere else a plastics plant shuts down, and then a factory line making something out of plastic, etc.  The ripple will arrive here as inflation first, then outright shortage.

Second, the US and Israel are stuck.  The US just expended 40% of its best munitions in a many week bombing campaign trying to cause regime change in Iran and destroy its ability to attack oil and gas infrastructure and close the Strait.  They failed on both counts: The regime did not change into one that was pro US.  It is now even more hardline than it was.  The Iranian regime has demonstrated it can close the Strait.  And that it can destroy (and keep destroyed) critical loading terminals, etc, in the gulf.  The US does not have enough precision munitions to do another round of bombing like that last one.

The US and Israel will have to capitulate.  But they cannot cannot bring themselves to let Iran have control of the Strait and build nuclear weapons.  So the politics remain stuck, while the oil storage is depleting.

Pay no attention to what the White House says.  The indicators to watch are the carrier groups, air craft, and marine landing ships.  Peace will only be real when those are pulled out of the Gulf and redeployed back to base.

Eventually the pressure will mount to either attack again, or leave.  Those are the only two choices.  Right now Israel is calling for more attacks and the Saudis are calling for the US to leave.  I have no ability to predict which they will choose.

But inflation is baked into the economy.  Possibly a recession also.  And here in the US those will arrive at the same time government benefits are being cut.

Now is the time to start thinking about how to fund the winter and spring planting.  There is still time to do something about those.