- Views: 17
- Replies: 2
After a week of the onset of America’s Operation Epic Fury and Israeli Operation Roaring Lion, the global crude oil prices are already at $100+, after almost 4 years, as the Strait of Hormuz, which accounts for around 20% of Global Oil Flows (at 20 million barrels per day), remains closed due to the heightened security & insurance risks involved and production of oil & gas in the GCC region remains affected due to Iranian attacks and the lack of storage facilities. It is a surge of almost 50% in global crude oil prices induced by an unexpected external & geopolitical shock but with significant economic aftershocks as Hormuz is a major strategic chokepoint and is used for the transit of not just oil, but also LNG, and the production halt in Gulf impacts other petro products as well with significant implications for the global economy at large.
A Dirty Nexus in a Structurally Flawed System
However, first, let’s look at how Trump’s oil gambit; disguised perfectly in the veil of geopolitics, earlier in Venezuela and now in Iran; favours only a very select few stakeholders who actually stand to gain & profit from the war while making the entire world pays for it in terms of a huge economic cost & pain. When Trump started his Presidential campaign for his second term in 2024, the most prominent donors to his election campaign were largely from the American Oil & Gas industry all of whom took a bet on Trump and funded him, in return, for favours on the policies & taxation front and facilitation of M&As in the sector. The Oil & Gas industry featured prominently in his donors list and raised millions for his re-election campaign, with ‘Dark Money’ (with undisclosed donor identities) accounting for much more, while Trump promised to fulfil their wish list in what could be described as a fundamentally & structurally flawed system (please refer to links in comments below).Since retaking the White House, Trump has rewarded the industry more than adequately by adopting the policy agenda prescribed by it by doubling down on the drilling of new oil fields, restricting Biden-era restrictions on LNG exports, quashing funding for renewable energy projects and loosening of environmental regulations on the oil & gas sector which is now booming with profits, shareholder returns and bonuses for the top executives.
The Geopolitical Lever
However, now, Trump is taking his game to the next level, the geopolitical dimension, by using his absolute Presidential authority as the Supreme Commander of the U.S. Armed Forces for the special economic interest of a select few. Let’s start with the Ukraine War where Trump actively intervened to broker a truce last year, in the guise of peace, while engaging with Putin for peace talks. However, in his hurried bid to strike a peace deal, which was skewed highly in favour of Russia, what he actually was doing was to ensure a re-entry for the American Oil & Gas giant, ExxonMobil, to Russia’s Sakhalin-I oil field from where it had to hastily withdraw, while squandering its investments worth billions, following the imposition of economic sanctions by the Biden Administration, in response, to Putin’s Ukraine invasion. Thus, Trump was forcing Ukraine to accept a deal which was fundamentally structured to favour Putin & Russia, in return, for economic favours for one of the prominent American Oil & Gas giants, which, somehow, was thwarted and rightly rejected by Ukraine.By taking control of Venezuela with his special military operation earlier in January, he tried to open a new growth avenue for the industry, the Venezuelan oil reserves, which are the largest in the world. His plan was for the U.S. Oil & Gas industry giants to invest in Venezuela’s poor oil & gas infrastructure’s development, so that they could, in turn, extracted & refine Venezuelan crude oil which could, subsequently, be sold in the global market. In fact, the Trump Administration even pocketed $500 million by questionably selling the Venezuelan oil post forced regime change in February. However, the industry was hesitant to invest in Venezuela owing to lack of political stability, visibility & clarity ahead and the inherent, substantial risks involved, besides the oil prices, which had been on the softer side for years owing to global oversupply and did not justify such risks.
Now, with his Iran war; initiated in collaboration with Israel & Netanyahu, and being justified by him on the basis of Iran’s nuclear & missiles programs & capabilities despite posing no imminent threat to the U.S.; has effectively taken the global crude oil prices past the $120 per barrel mark already (yesterday) as shipping in the Strait of Hormuz comes to a halt and the oil & gas production in the entire Gulf region remains impacted due to Iranian strikes & lack of storage facilities. This surge in oil prices again serves the American oil & gas industry moguls as higher oil prices directly translate into higher profits for the industry as well as shareholders, many of which are ultra-rich American elites allied to and aligned with Trump. Also, higher oil prices specially suit the American Shale oil, which is relatively more expensive than conventional crude, owing to the employment of Fracking for extraction, which is more expensive and requires the global crude oil prices to be at $80 or above, to be economically viable. Thus, the current scenario means tailwinds for the American Shale oil producers as well.
The Losers & Gainers
It, thus, clearly means economic gains for the American industry and elites versus pain & economic cost for the ordinary Americans, who are being bitten by the surging gasoline prices while actually footing the $1 billion per day bill of the war in Iran, in addition, to the rest of the world as just a $1 increase in oil prices per barrel translates into $1.5 billion in oil import costs for a country like India which imports around 85% of its oil requirements from multiple global producers. It also affects and impacts all other nations as well which are net oil importers while also impacting their fiscal deficits, balance of payment situations and economic growth rates while also fuelling inflationary pressures. In terms of gainers, Russia is likely to be the top global gainer, beyond the U.S., as China & India, world’s fastest growing large economies, are already switching to Russian oil now as the supply of Middle Eastern oil is effectively choked at the Strait of Hormuz.Thus, economically & geopolitically, America and Russia are the key gainers from rising oil prices while Europe & Asia and billion of ordinary people are effectively set to be the top near term losers while the entire world & billions of ordinary people bears the economic pain and cost of an unnecessary & opportunistic regional war caused by a single man’s idiosyncracies & complicity as without Trump’s support Netanyahu wouldn’t have been able to launch an all-out war against Iran at this scale.
Trump, thus, is exposing the entire global economy to serious risks of supply chain disruption & even recession as the next major catastrophe after the pandemic while also putting billions of lives globally at stake owing to the likely resulting food shortages just to serve the insatiable avarice of his campaign donors & some ultra-rich Americans for profits and that’s the ugly truth behind his entire political modus operandi in the White House so far devoid of any consideration for the constitution, laws, rules & regulations & norms let alone peace, humanity or even morality...
