(Lack of) US Iran Peace Agreement Part 5

[OnePeppyFatball]

Part 5

I think we are talking apples and oranges here. I was talking about the process of getting Vz oil to the consumer sooner than expected. There are current talks for Vz oil (and gas in a shared field with Trinidad and Tobago) to be refined in the Caribbean, which will mean a faster delivery than eg having to be transported to a US refinery. (It also has the advantage of not needing to go through Hormuz to get to market).
As production expands, Vz products will cushion the deficit to some extent but no current country is capable of replacing all the lost ME oil. (I know you didn't suggest this). Several European oil majors are also keen to start operations in Vz and I believe that the current ME situation will be lighting a fire under the decision makers.

From AI
Using the 5–7 million barrels/day disruption figure:

• 10% of 5 million bpd = 500,000 bpd
• 10% of 7 million bpd = 700,000 bpd

So Venezuela would need to add roughly 500,000–700,000 barrels per day of additional exports to cover 10% of the disrupted supply. For perspective, that's substantial but potentially achievable over time. It would represent roughly 15–21 million barrels per month of additional Venezuelan supply. The key distinction is timing: Venezuela couldn't add that much instantly, but increased production and exports over the next few years could make a meaningful contribution to replacing disrupted Middle Eastern oil.

@trumpredcard ,

The real issue is that strategic oil globally is being drawn down at 5-6 million barrels per day, with total storage at 2-2.5 billion barrels.

So, in under one year, it will be all gone!

Obviously, that isn’t going to happen. So, what will happen is price adjustment until oil supply is equal to oil demand. More supply will come online from expensive producers but demand will also have to fall.

Guessing where that equilibrium price lies is a mug’s game, but economists are paid to be mugs, so here is the UBS economist’s guess at around $200/barrel.

https://www.swissinfo.ch/eng/energy-transition/oil-could-hit-200-if-hormuz-stays-shut-ubs-economist-warns/92041617

With stock prices high already by most valuations and AI actively being doubted (both safety and monetisation), the results of this won’t be pretty.

As I keep saying, we are in very dangerous territory here financially and geopolitically.

And, of course, what everyone forgets and isn’t really priced, is climate change. People will burn all and any hydrocarbons to get energy, including the filthiest and highest emitters of greenhouse gases. Welcome to malaria and dengue in Europe and the UK.

Trump will certainly be remembered as a consequential president!

WSJ:

“The point is that what happens in the Red Sea affects the rest of the world. The U.S. has blockaded Iran’s ports. And Iran hasn’t been able to stop the U.S. Navy from safely escorting some oil tankers through Hormuz, so it has tasked the Houthis to expand the war.
Most threatened are the Saudis, who support the government in Yemen against the Houthis. If it can’t export oil, the Kingdom will have to shut in wells that can take a long time to restart. Houthi Red Sea dominance also poses major risks to Israel, which has had to defend its cities against Houthi missiles. With Hamas to the west, Hezbollah to the north, and Iran to the east, Israel doesn’t want an expanded threat to the south.”
“Houthi control over Bab al-Mandab is also a threat to Egypt, which earns as much as 2% of its GDP from Red Sea transit fees. Those fees have fallen as security risks have increased, and that has hurt an already strained government fisc. The Middle East doesn’t need political unrest caused by economic hardship in Cairo.
All of this argues for a regional military response to the Houthis, but who will lead it? Saudi Arabia spends $70 billion a year on defense and has a capable air force. But it can’t defeat the Houthis alone or merely from the air. Retaking the strategic islands and ports will require ground troops.
A combined Israel-Saudi operation would be more formidable, and such cooperation might further Prime Minister Benjamin Netanyahu’s longtime goal of having Saudi Arabia join the Abraham Accords. It also might help his chances in Israel’s late-October elections. ”
“The coalition would be even stronger if skittish Egypt lent its manpower to the fight. This carries risk of an expanded war, but then Iran and the Houthis are already expanding it. The question is whether the Houthis will be allowed to get away with it.
Such a coalition is more likely if the U.S. signals its diplomatic and military support. Mr. Trump wants to downplay the war’s impact in the runup to the U.S. election. But Americans can see the impact in gasoline and energy prices every day. A Houthi blockade of Saudi oil could cause further price spikes, and even more election harm for Republicans.
Wars are unpredictable, and the enemy isn’t obliged to cooperate. With his concessions to win a ceasefire in April, Mr. Trump thought he could get Iranian acquiescence. Vice President JD Vance said Iran’s leaders are “a much different group of people” for whom “something has fundamentally transformed.” Instead the hard men of the Islamic Revolutionary Guard Corps and its allies have escalated. ”
There are now risks all around, but the biggest is if the world concludes that Iran and the Houthis are defeating Mr. Trump, the U.S. and its Middle Eastern allies. Someone needs to stop the Houthis.

Excerpt From
“Opinion | Who Will Stop the Houthis?”
The Editorial Board
The Wall Street Journal
https://apple.news/AhoaalhkxRU2w8wtRpyxHHg
This material may be protected by copyright.

@OnePeppyFatball ,

That article sounds like a wish, rather than a demand.

It’s kind of what I have been saying about no easy choices.

The problem is that, unless you are prepared to put a fair few soldiers in Yemen, you can spend a lot of time and effort and interceptor missiles to push the Houthis back a few k and for a few months.

I think this war has taught us that the calculus between attack and defence has changed due to mixing in drones and ballistic missiles.

So, unless this changes back due to lasers or other cheap ways to defend, aggressors will either have to spend a lot more on defence or accept taking hits on infrastructure. The west has a very low tolerance for pain.

I would have thought reopening Hormuz would actually be less painful than stopping the Houthis, not that that is easy either.

https://www.cbsnews.com/news/new-photos-damage-u-s-kuwait-saudi-arabia-iran-drone-missile-attacks/

New photos obtained exclusively by CBS News reveal for the first time the widespread damage and destruction of buildings and vehicles at multiple U.S. positions across the Middle East, as a result of Iranian missile and drone attacks.

The images were sent to CBS News by active service members on condition of anonymity because of rigid media restrictions within the military.

"This is major damage to our bases that hasn't been communicated to the American public," one deployed service member told CBS News. "We're standing there with our eyes closed getting punched in the face."

if it can’t export oil, the Kingdom will have to shut in wells that can take a long time to restart
I can't remember where it was, but this has been discussed previously and it was pointed out, not accurate, as worker-overs, side tracks and simply drilling new wells can be done to bring a field back online fairly quickly.

@Newbutoldfather I do take your points but when I look back at how recent it was that oil had a negative price and compare it to current soaring prices, I think that predictions are a mug's game because there are so many 'ifs'. No one could have predicted the short space of time between a $-ve and a potential $200 price because noone thought Trump would be stupid/hubristic enough to attack Iran and try to wrest control of the SoH.
I've reached the stage of just sitting back and watching things unfold as I'm well beyond any arguments that rely on either past decisions to predict future actions, or speculations. What I will do though, is read all the books and articles recommended as I have learned much from info shared on the threads.

I would have thought reopening Hormuz would actually be less painful than stopping the Houthis, not that that is easy either.

Intriguing. Would you mind expanding on this? Did you mean less painful to the US, the world, or the GCC countries? What options for reopening Hormuz were you think of?
These are genuine questions and I'm not trying to be argumentative. 😄As I said, I'm just sitting back, watching things unfold.

@trumpredcard ,

‘Intriguing. Would you mind expanding on this? Did you mean less painful to the US, the world, or the GCC countries? What options for reopening Hormuz were you think of?
These are genuine questions and I'm not trying to be argumentative. 😄As I said, I'm just sitting back, watching things unfold.’

I’m just speculating, really. The U.S have already partially reopened Hormuz and at least it is a known problem which has probably already been discussed and planned for.

No one seems to want to take on the Houthis, and I assume that they have good reason for it. It would also be opening up another front.

As I said, neither are easy and both expensive, but I suspect Hormuz might be the easier of the two.

Yes. There is a thread on oil wells because Trump said they would blow up if shut down, and there was speculation they would be forever damaged. It was debunked. The Gulf geology is fine for stopping and starting.

It is how the Gulf states regulate the oil price after all through OPEC. I think it is wells in Russia that can have issues starting and stopping.

Quote "As I said, neither are easy and both expensive, but I suspect Hormuz might be the easier of the two."

How many months has it been now ? The greatest mind in the universe said 2 weeks or so... about 6 months ago ?

The Houthi said their Strait is open, just not to SA oil.

@RedTagAlan ,

If you take out Saudi Oil (obviously some is getting through) and Iranian oil due to U.S blockade, that’s 60% of the Middle Eastern oil taken out.

Saudi has traditionally been the ‘swing producer’ in OPEC and has cheap light sweet oil. The oil is really easy to get at, too, so wells can be shut down and restarted fairly quickly.

WTI is at around $104 now with oil taken from strategic storage every day. And some of the oil products are faring even worse.