Derrick and the Dominos
And I said, “Hey kid, you think that’s oil? Man, that ain’t oil, that’s blood.” Bruce Springsteen, Lost in the Flood.
As “the founding director of the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs and a co-founding dean of the Columbia Climate School” (and a very serious Bruce Springsteen fan), there are few people who understand the global energy market better than Jason Bordoff. Thankfully, Jason also excels at explaining energy issues in clear terms that the rest of us can understand. Since energy, particularly the oil that used to travel through the Strait of Hormuz, is now at the core of the Iran war, it’s a good time to catch up on what’s happening and what’s at stake. Ezra Klein interviewed Jason Bordoff earlier this week on his podcast. NYT (Gift Article): What Happens if 20 Percent of the World’s Oil Disappears? “The Gulf — the Middle East — we all know, since the 1970s, is a huge energy producer: Iraq, Saudi Arabia, the United Arab Emirates, Iran, of course. All of that oil, most of it, flows by tanker through this very narrow strait that juts like a little triangle around a corner, and it’s right where Iran is. So it doesn’t take that much with some drones or explosives in a dinghy boat racing out to a tanker … You’re talking about a disruption of about 10 million barrels of oil, maybe a little bit more — so more than 10 percent of global supply. During the Arab oil embargo in 1973, in contrast, you saw about 6 or 7 percent of world supply disrupted. So this is by far the largest energy supply disruption we have ever seen.” (You’ll have to read or listen to the end for the Springsteen-related tips…)
+ For most of the world, the oil and energy wars are creating chaos, concern, and higher prices. For some people, the massive price swings, often driven by presidential tweets, present quite the opportunity. “Traders bet hundreds of millions of dollars on oil contracts just minutes before US President Donald Trump announced on Monday that the US would postpone strikes against Iranian energy infrastructure. Market data reviewed by the BBC shows the volume of trade spiked around fifteen minutes before a social media post by the president announcing the move.”
+ “Trump’s sudden climb-down was startling. Who could have seen this coming? The answer is, the person or people who bought large quantities of stock market futures and sold large quantities of oil futures around 15 minutes before Trump’s announcement.” Paul Krugman: Treason in the Futures Markets.
+ How will the market respond to the instability and madness spreading from the Oval Office across the globe? You’d think it would be concerned. But, as I explained yesterday, it’s a Bull—- Market.
