One would think hindsight would be 20:20 on the US ending Iran oil waivers on Monday and the surging price of oil in the first 48 hours since that happened. The Trump Administration remains upbeat, however, and confident that what clearly just happened won’t happen.
Trump economic adviser Larry Kudlow made comments Tuesday at the
National Press Club, comments which again came two days after the
announcement, and after two days of prices going up substantially,
assuring that there would be no price increase.
“I don’t see any palpable impact. The world is awash with oil,” Kudlow
told the audience. That clearly appears to have been the
administration’s rationale, with several officials emphasizing the
excess oil on the market before this move was ultimately made.
Their math was a bit off though. Estimates of tens of thousands of
additional barrels of oil supply being available were slammed headlong
into a US move that aimed to stop Iran’s roughly one million barrels of
daily oil sales. This has already lead to a rush on the market, with
nations trying to secure supply while they can, and at higher prices.
All of this was well predictable. Indeed, financial outlets had already
predicted that the administration would have to keep the waivers program
going specifically because they couldn’t afford this increase in global
prices. Instead, they deluded themselves into thinking it wouldn’t
happen, and when it did, continued to maintain that it didn’t, or
wouldn’t.
Trump made the mistake of going too far in dismantling international accords and flagrant disregard for international law. Now all pretense of decorum has been lost and everyone, including formerly obedient vassals, are vigorously pursuing their own self interest. This would include energy security. Whether OPEC covers output or not doesn’t matter for long term energy security. They’ll slowly move away from traditional markets and form their own infrastructure and vehicles for exchange of goods and services. This will in turn reduce demand for the petrodollar. At the end of the day, you’ll be left with a small group of highly volatile state actors that still cling to it as the de-facto standard currency. Hard times ahead.
It’s just a matter of what “palpable” means to you. Rich folk don’t concern themselves with the price of gas while normal folk have to adjust their already tight budgets with the slightest of increase .
Sorry, I didn’t see Tecumseh’s comment before I made mine. Didn’t mean to be redundant and I don’t know how to delete a comment.