Blasé Capital oil as a FOIL
No one knows how it happens. Indeed, no one wanted to, as almost everyone, including the ones who would be hurt by it, heaved a huge sigh of relief. Global crude oil prices first jumped by 40-50 per cent within 48 hours to $120, and then crashed unexpectedly to $90 within the next 24 hours. When the prices rocketed, like the Iranian missiles that hit oil wells, refineries, inventories, and gas supplies, the reason was the huge premiums due to the closure of the crucial Strait of Hormuz, which accounts for a third of the crude oil flows. When the price plummeted, although it remained quite high, an opposite explanation was forthcoming. The markets overreacted, and the dangers were not as severe as the traders believed. What changed in a day that crude lost most of the gains? What changed the minds of the traders? What is the mystery behind the oil-on-the-boil narrative?
Vladimir Putin of Russia, Donald Trump of the US, and the G-7 leaders can take credit for the calmness, although they need to be held responsible for the war mess in the first place. In televised comments, Putin magnanimously said that Russia was ready to supply oil and gas to Europe, which curtailed its dependence to a mere 13 per cent in 2025. At a meeting, which included the top local oil producers, Putin said, “If European companies and European buyers suddenly decide to reorient themselves, and provide us with long-term, sustainable cooperation, free from political pressures, then yes, we have never refused it. We are ready to work with the Europeans too.” The man who created the oil mess in 2022 offers to correct the one generated by the US in 2026. Putin the warrior is Putin the saviour. It is an irony that defies explanations. Well, in some ways, it does not need to be explained.
Even before Putin’s generous offer, albeit attached to larger diplomatic gains, the leaders of the G-7 nations met at an emergency meeting. They tried to calm the user nations, warring ones, and investors and oil traders that they would take the “necessary measures” to enhance the global supplies. They could resort to the last-possible ‘emergency’ step, and release crude oil from the strategic reserves. Despite the words, which sound more like verbal rhetoric, the finance ministers of the G-7 failed to reach a concrete agreement with the International Energy Agency. A few days ago, the US President Trump said that he would not need to touch the American reserves as there was enough oil in the world. Apart from the US, and partly Canada, the five other members are oil consumers, and not oil producers. Hence, there is a distinct possibility that they open the tap, but only if everything else fails.
Indeed, Trump offers the best possibility that the emergency taps and valves remain unopened. He gave several optimistic verbal bytes in the past few days. He allowed some consumers like India a 30-day period to buy Russian oil, as a huge favour. Then, he grandly announced that he may lift sanctions against oil producers such as Russia, Iran, and Venezuela. “So, we have sanctions on some countries. We are going to take those sanctions off until this straightens out. Then, who knows, maybe we will not have to put them on, there will be so much peace,” he said at a news conference. This coming from a man who perpetrated the Iran war. The offer from one who blamed Russia for the Ukraine war, and abducted the Venezuelan president and his wife. More important, this from a president who flip-flops like, well, only the way Trump can.
Trump indicated that the Iran war will be a short one, and may last a few days. But one is not sure. He keeps changing his stance. Earlier, he maintained that he will not stop the war unless Iran is finished, or down on its knees. There are sections within the White House who wish to wipe out Iran, and not let the story be left incomplete as the US did with Iraq and Afghanistan earlier. Israel wants the same. It does not wish to live in the fear of a future resurgence in Iran. Most of the Middle East, after the way Iran destroyed their oil assets, and other infrastructure do not want any chances of a strong Iran later. Yet, as Iran remains defiant and resistant, although the number of its missile attacks have dropped from several hundreds on the first day to a few dozens a day now, it may not be easy to end the war fast.
Remember, this is the first time in a thousand years that Sunnis and Shias have got together to condemn the death of Iran’s Shia religious leader. This has happened across the world, even in the Middle East, although the national leaders stay opposed to the religious leader, and sections in Iran’s society celebrate his death. It seems like poetic justice that Iran which, for decades, wanted to bring the Shia and Sunni radicals together in a united and combined fight against the West (and America) may find it easier to do so once the ongoing war ends. Just like an individual did after Russia invaded Afghanistan in the 1980s.
