SocGen Lays It Out: "EU Iran Embargo: Brent $125-150. Straits Of Hormuz Shut: $150-200"
Previously we heard Pimco's thoughts on the matter of an Iranian escalation with "Pimco's 4 "Iran Invasion" Oil Price Scenarios: From $140 To "Doomsday"", now it is the turn of SocGen's Michael Wittner to take a more nuanced approach adapting to the times, with an analysis of what happens under two scenarios - 1) a full blown EU embargo (which contrary to what some may think is coming far sooner than generally expected), and the logical aftermath: 2) a complete closure of the Straits. The forecast is as follows: 1) "Scenario 1: EU enacts a full ban on 0.6 Mb/d of imports of Iranian crude. In this scenario, we would expect Brent crude prices to surge into the $125-150 range." 2) "Scenario 2: Iran shuts down the Straits of Hormuz, disrupting 15 Mb/d of crude flows. In this scenario, we would expect Brent prices to spike into the $150-200 range for a limited time period." The consequences of even just scenario 1 is rather dramatic: while the adverse impact on the US economy will be substantial, it would be the debt-funded wealth transfer out of Europe into Saudi Arabia that would be the most notable aftermath. And if there is one thing an already austere Europe will be crippled by, is the price of a gallon of gas entering the double digits. And then there are the considerations of who benefits from an Iranian supply deterioration: because Europe's loss is someone else's gain. And with 1.5 million of the 2.4 Mb/d in output already going to Asia (China, India, Japan and South Korea) it is pretty clear that China will be more than glad to take away all the production that Europe decides it does not need (which would amount to just 0.8 Mb/d anyway).
SocGen's situation summary:
- Scenario 1: EU enacts a full ban on 0.6 Mb/d of imports of Iranian crude.
- In this scenario, we would expect Brent crude prices to surge into the $125-150 range.
- The extent of the bullish impact will depend on the terms of the actual EU embargo, including how quickly it will be phased in. Another important variable will be how much Iranian crude is cut by non-EU countries, such as Japan and S. Korea, as a result of US pressure. This will determine how much Iranian crude has to be replaced by Saudi Arabia, and how much spare capacity Saudi Arabia has remaining after it increases output. Lower Saudi spare capacity equals higher prices. An EU embargo would possibly prompt an IEA strategic release. The price surge would dampen economic and oil demand growth.
- An EU embargo is considered likely, especially after the EU reached an agreement in principle on an embargo on 4 January. When it is announced, depending on the timing and details, we may revise our base case oil price forecast upward. Our current Brent crude price forecast for 2012 is $110.
- Scenario 2: Iran shuts down the Straits of Hormuz, disrupting 15 Mb/d of crude flows.
- In this scenario, we would expect Brent prices to spike into the $150-200 range for a limited time period.
- We believe it would be relatively easy for Iran to shut down the Straits of Hormuz. A credible threat from missiles, mines, or fast attack boats is all it would take for tanker insurers to stop coverage, which would halt tanker traffic. However, we believe that Iran would not be able to keep the Straits shut for longer than two weeks, due to a US-led military response. The disruption would definitely result in an IEA strategic release. The severe price spike would sharply hurt economic and oil demand growth, and from that standpoint, be self-correcting.
- A Straits of Hormuz shutdown is not likely. We estimate the probability of this very high impact event at 5%. Although Iran may like the idea of retaliation in order to hurt its enemies, by halting its oil export revenues, it would hurt itself even more. Moreover, Iran would do this at the cost of provoking a military response that could destroy much of its military and perhaps even its nuclear program.
A quick summary of who are the main export partners of Iran crude:
Since early November, geopolitical risk related to Iran has re-emerged as one of the factors supporting prices in the oil complex. More to the point, the markets have become concerned about the possibility of a partial disruption to Iran’s 2.4 Mb/d of medium and heavy sour crude exports (as detailed in the table below). In addition, the markets are also thinking about the small probability but very high impact scenario where Iran shuts down the Straits of Hormuz, which would halt flows of 15 Mb/d of crude and a significant amount of NGLs, refined products and LNG.
The key developments since November have been an important IAEA report on Iran’s nuclear program, moves by the US and EU to impose sanctions on the Central Bank of Iran and on the oil sector, and Iranian military exercises in the Persian Gulf.
- The escalation of the issue for the oil markets began ahead of the widely anticipated November 8 International Atomic Energy Agency report on Iran. This report contained much more evidence than previously published which strongly indicated the military nature of Iran’s nuclear program (although the report stopped short of formally reaching that conclusion - a step with diplomatic repercussions). Before and after the IAEA report, there was much discussion about an Israeli and/or American military response to Iran’s nuclear program.
- In early December, the EU began to consider a ban on imports of Iranian crude (more on this below).
- In late December, Iran conducted ten days of naval and military exercises in the Persian Gulf and the Straits of Hormuz. Iran repeated its oft-stated threats to close the Straits of Hormuz. Both Iranian and Western naval forces have conducted exercises in the PG many times before: Iran practices closing down the Straits of Hormuz and the Western allies practice reopening it. However, it seems more serious this time because of the context: Iran’s steady progress towards a nuclear weapon capability and – in response – moves to increasingly tough sanctions by the US and EU, which are clearly targeting oil.
- On December 31, President Obama signed new US sanctions into law. The sanctions say that any financial institution that does business with the Central Bank of Iran cannot do business with the US financial system. Because the Central Bank receives payments for almost all of Iran’s crude export sales, this directly targets Iran’s oil sector and revenues, which accounts for 60% of its economy. In effect, the oil companies and refineries that purchase Iranian crude would be forced to stop buying, because they would have no way to pay for the oil. Despite these harsh restrictions, the law does not take effect for 6 months (although Iran’s currency has already plummeted, losing 40% of its value vs. the dollar in the last month). Even more importantly, the White House has almost total flexibility and discretion in how to enforce the law. The US wants to hurt Iran, but with a fragile economy, it does not want to cause a shortage of crude and an oil price spike. The US has said that it will grant waivers to countries that show progress in reducing their purchases of Iranian crude oil. The bottom line is that the US now has a very powerful tool to exert pressure on Iran’s crude customers, but it will use this tool with finesse and an eye on the oil markets.
- On January 4, the EU reached an agreement in principle to ban its 0.6 Mb/d of imports of Iranian crude – 25% of Iran’s total exports. Italy, Spain, and Greece are the European countries most dependent on Iranian crude, and apparently, the objections of these countries have been overcome. It is not at all clear what the EU embargo will look like. As Italy has made very clear, it has not even been decided whether the embargo will be full or partial, and how quickly it will be implemented or phased in. The key is that EU countries need to be able to arrange alternative supplies, primarily from Saudi Arabia, the main holder of spare production capacity. Talks on making these arrangements are assumed to have been taking place since December, if not earlier. The EU is reportedly hoping and planning to announce its embargo, including the details, on January 30, at the next EU foreign ministers meeting. Europe has the same concerns about a fragile economy and an oil price spike as the US, probably even more so. Because of this, we expect a slow and gradual implementation of what will eventually become a full embargo. One possible option that has been reported is for the EU embargo to take effect at the end of June, at the same time as the new US sanctions. This would be a tidy solution and makes a lot of sense. Whenever the EU embargo is officially announced, we expect the IEA to quickly follow up and make it very clear, probably through a press release and/or a press conference, that it would coordinate a release of strategic reserves, if needed, to ensure crude supplies to its European member countries. We also expect Saudi Arabia to make it known, perhaps quietly, that it will be providing additional supplies to European refiners.
While so far Iran talk has not manifested in big price swings in Brent, Urals have been notably impacted:
Despite all of the talk about Iran, there has been no discernible impact on Brent prices, in absolute terms. Front-month ICE Brent prices remain rangebound. At $112-114 in recent days, Brent has risen to the top of the trading range seen since November; however, there has been no upside breakout. Moreover, recent crude price gains have been not only due to Iran, but also to positive macro data flow from the US and China, and to strong risk appetite. That said, we believe that the US sanctions and the EU embargo are clearly supportive. Iran represents a bullish tail risk that will make traders think twice about going short.
The one place where EU embargo concerns may have had a market impact – though it is debatable – is on Urals prices, where differentials to Brent have been quite strong. Urals, which directly competes with Iranian grades and is a substitute, has priced at an unusual premium to Brent in recent weeks. However, the Urals strength preceded the proposed embargo, and Iran is only one of several factors. Urals has been supported by strong Russian domestic demand and restrained exports to Europe, as well as ongoing supply disruptions in Syria (-160 kb/d) and Yemen (-80 kb/d).
How much oil is at stake.
What’s at stake? Iran produces 3.5 Mb/d of crude. It processes 1.1 Mb/d of crude in domestic refineries, and exports the remaining 2.4 Mb/d. The oil markets are concerned with the 2.4 Mb/d of exports. The breakdown is shown in the table above. Of the 2.4 Mb/d of crude exports, 0.8 Mb/d goes to OECD Europe, including 0.6 Mb/d to EU countries and 0.2 Mb/d to Turkey. Iran’s main market, however, is Asia, which takes 1.5 Mb/d of crude exports, including 0.5 Mb/d to China, 0.4 Mb/d to India, and 0.5 Mb/d to Japan and S. Korea.
As discussed above, our view is that the EU will put a full embargo in place, which would stop the 0.6 Mb/d to the EU; however, after the announcement, the implementation will be phased in gradually. We do not believe that Japan and S. Korea will participate in any embargo; however, the US, through its own sanctions, will put pressure on its close allies to reduce imports from Iran, and the combined 0.5 Mb/d could be lowered. We expect flows to China and India to continue; they may even increase, particularly if refiners can negotiate discounts from Iran. However, as discussed below, we do not think that Iran will be able to simply sell its entire EU 0.6 Mb/d in Asia instead.
A breakdown of how SocGen gets to its Scenario targets: "Scenario 1: EU bans imports of Iranian crude. Brent prices in the $125 - $150 range."
When the EU embargo is announced and is implemented, obviously there will be a bullish knee-jerk reaction across the crude complex, paper and physical, in response to the announcement. Beyond this, what will happen?
As noted above, we believe that Iranian flows to Europe will be replaced, primarily by Saudi Arabia, but with some help from Kuwait, the UAE, and Qatar. Discussions to arrange those replacement supplies are reportedly already taking place. As shown in the chart below, OPEC crude production spare capacity in November was 2.25 - 2.75 Mb/d; indications are that it did not change materially in December. With Saudi output at 9.75 Mb/d according to the IEA, and capacity at 11.5 – 12.0 Mb/d, Saudi spare capacity was 1.75 Mb/d – 2.25 Mb/d. Kuwait, the UAE, and Qatar combined for another 0.5 Mb/d of spare capacity, mainly in Kuwait and the UAE. The Saudis alone can easily replace the EU’s 0.6 Mb/d, and there is more than enough spare capacity to make up for volumes that other countries, such as Japan and S. Korea, might need if they reduce imports from Iran.
However, even though the Saudis and OPEC can make up the supplies, an embargo would be bullish. The reason is that there would be less spare capacity remaining after replacing Iranian volumes. Libya is also a wildcard. If Libyan production continues to ramp up from the current 0.9 – 1.0 Mb/d, we expect the Saudis to start to decrease their Libyan replacement volumes, which would give them back some spare capacity.
There are other variables. In order to make up for lost sales to Europe, we would expect Iran to try to sell additional volumes to Asia, specifically to China and India. This is easier said than done. Focusing on the Saudis, refiners in both countries have term contracts with Saudi Aramco, and could not simply tell the Saudis to reduce their exports. They would have to ask, and the Saudis have no reason to say yes. Why should they lower revenues in their key regional market, in order to help out their biggest geopolitical rival? It would not make any sense.
The question, therefore, is: how much incremental Iranian crude could China and India take? It depends on their overall crude demand level, how much they are committed to taking from other producers, and importantly, what the price of Iranian crude is. Chinese and Indian refiners would have good negotiating leverage with Iran, who would have to cut their prices for Asian customers. Indeed, China has already taken significantly less Iranian crude in January, they may do it again in February, and we believe this to be posturing and setting up a negotiating position. Our “guesstimate” is that Iran would only be able to sell a maximum of 200-300 kb/d of the available EU 600 kb/d to China, India, and maybe other countries. So Iran would get hurt from lower revenues, due to both lower volumes and also due to forced price discounting.
Logically, an embargo on Iran should mainly impact the sour crude markets, in the form of stronger backwardation on the forward curve for Dubai, stronger differentials vs. sweet crudes, and stronger differentials for Asian vs. Atlantic Basin crudes. However, we believe that paper markets would also be affected and that there would be a bullish impact on ICE Brent and NYMEX WTI, even though they are sweet crudes.
Depending on the EU embargo scenario and how much Iranian crude is cut by non-EU countries such as Japan and S. Korea, and depending on how much Saudi spare capacity remains after replacing Iran volumes, we expect Brent prices in the $125-150 range. An embargo would possibly prompt an IEA strategic release. Finally, the price spike would dampen economic and oil demand growth. An EU embargo is likely, and when it is announced, depending on the details, we may revise our base case oil price forecast upward. Our current Brent crude price forecast for 2012 is $110.
And " Scenario 2: Iran shuts down the Straits of Hormuz. Brent prices in the $150 - $200 range."
The most bullish scenario would be if Iran retaliates, or even pre-empts, an embargo by trying to follow through on its oft-stated threat to shut down all shipments through the Straits of Hormuz. Based on JODI crude exports data for Iran, Iraq, Kuwait, Saudi Arabia, the UAE, and Qatar, we estimate flows are currently running at around 15 Mb/d. This is based on total exports from those countries of roughly 16 Mb/d, minus around 1 Mb/d of flows that do not go through the Straits of Hormuz; the latter includes 450 kb/d of Iraqi exports through the Kirkuk – Ceyhan northern pipeline and 800-900 kb/d of Saudi exports through the East-West pipeline to Yanbu on the Red Sea.
We believe it would be relatively easy for Iran to shut down the Straits of Hormuz, but that they would not be able to keep it shut for long. Importantly, Iran would not actually need to succeed in sinking an oil tanker or a naval ship to shut down the Straits. A credible threat would be enough to shut down oil shipments, because tanker insurers would stop coverage and traffic would cease. Threats could include mining the Straits; launching a surface-to-ship missile or maybe even just arming launch radars on those installations; or swarming armed small fast patrol boats around tankers – all of which would be detected by routine naval and air patrols conducted by the Western allies.
That said, we do not believe the Western allies would allow the Straits to be shut for a prolonged period. A disruption to oil flows would be considered a national and economic security threat, and if necessary, military force would be used to re-open the shipping lanes in the Persian Gulf. Our view is that Iran would not be able to keep the Straits closed for more than 2 weeks. In addition, after the re-opening, it would be possible to maintain security through the use of naval escorts for tankers, as happened during the 1980s Iran-Iraq war.
In the event of a shutdown of the Straits of Hormuz, disrupting 15 Mb/d of crude flows, we would expect Brent prices to spike into the $150-200 range for a limited time period. The disruption would definitely result in an IEA strategic release. Lastly, the severe price spike would sharply hurt economic and oil demand growth, and from that standpoint, be selfcorrecting. A Straits of Hormuz shutdown is not likely; we estimate the probability of this very high impact event at 5%. Although Iran may like the idea of retaliation and hurting its perceived enemies, it would hurt itself even more, by halting its oil export revenues. Moreover, Iran would do this at the cost of provoking a military response that would destroy much of its military and perhaps even target its nuclear program.
Next steps and key dates:
- December 31/January 1 – The US responsibility for securing Iraqi airspace formally ended, and Iraq’s responsibility for its own airspace formally began. Iraq has no effective air force. Therefore, the shortest route for Israeli aircraft to attack Iran’s nuclear sites - straight through
Iraq – is available. - January 30 - EU foreign ministers meeting: possible announcement of EU embargo on imports of crude from Iran
- February – Iran’s next announced naval exercises in the Persian Gulf March – Iranian elections
- June 30 – new US sanctions on the Central Bank of Iran take effect.
- September – According to Ehud Barak, the Israeli Defense Minister, after September, a successful military attack on Iran’s nuclear sites will no longer be possible, because Iran will widen the redundancy of its facilities and spread them out over more sites, including the impenetrable site at Fordow (near Qom), which is located inside a mountain.
- November – US elections
- December – According to Leon Panetta, US Secretary of Defense (and former Director of the CIA), Iran could have a nuclear weapon capability by the end of 2012.
(6 votes)
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Long bicycles and rollerblades!
Oil to $200 a barrel (which is what the pits want, just like they were cheering on Iraq-U.S. hostilities, 'cause it makes the longs bank) easily within days of true hostilities regarding Hormuz.
How high it goes after that is anyone's guess, because of the practical, tactical and speculative forces (some legit, many not) at work.
The irony is that at $150 a barrel, it sets up the global economy for the BIG Double Dipper, which will bring on 2008 redux. $200+ puts the globe in a depression.
At that point or beyond, and it's a long walk home, in the cold, icy streets.
Any claim that Saudi Arabia or any other big producer is going to plug the output gap from Iranian Oil based is pie-in-the-sky.
p.s. -
Highlights Ron Paul in ABC News Debate January 7th, 2012au-fooie, this is alarmist crap as usual. First off there is an OIL GLUT. Second US drivers and European have cut back gas use severly. Third, the military isn't burning up a trillion gallons of fuel a day in Iraq. Forth, just like the 'shorts' are treated, the world governments will cut the legs of speculators if they try to cash in....so beware.
Oil glut is irrelevant if you can't get to the oil.
USO CALL SPREADS, BITCHEZ
The only plausible way by which Barry & Associates (including the Zionist warmongers) could justify a war against the Islamic Republic of Iran is by staging another false flag attack on continental United States: most likely a controlled nuclear explosion (dirty bomb) targeting a major urban concentration that may kill dozens of thousands of civilians.
This operation will be carried out by the CIA in partnership with Mossad and MI6 to subsequently be blamed on AlQaeda working in conjunction with elements of Iran’s IRGC and Pakistan’s ISI.
Besides that, Americans are a bunch of stupid animals easy to manipulate and subdue. The psychological impact of this event will elicit the brute and ignorant populace to demand a massive retaliation against the alleged perpetrators (explicitly Iran); the Obama administration will need the unconditional support of these mules in order to further their wicked agenda.
Absent of this essential prerequisite (a false flag operation), President Soetoro will find virtually impossible persuading US Congress to issue a formal declaration of war.
Ps. To all of you, Strauss' Vulgar Many out there, as soon as the first bullet is fired in the Persian Gulf, you can certainly say good-bye to all of your ridiculous investments.
Im so glad I bought that Chevy Volt! /sarc
Iran can't close the Hormuz. If they were to REALLY close it, they will have to start sinking or boarding and redirecting ships. This type of embargo action is a clear act of war.
Sorry for the cut and paste, but reminds me of the tactics that founding fathers used against the vastly superior forces of the British in 1776...
The matter of what specific tactics would be employed remains speculative, contingent upon the regional and global strategic environment present at the time Iran's strategists decide to take action. They could run the gamut of sabotaging ships in all sorts of asymmetric ways to "soft" mining and obstruction tactics that could be blamed on "pirates." If regional exporting states collaborated with the United States on an Iran oil embargo, those measures could be accompanied by infrastructure sabotage, as seen in conflicts in southeast Turkey, Nigeria, or Egypt.
This strategy does not rely on Iranian ingenuity or a newfound method of warfare. But the fact that it has the most strategic coastline on the waterway and the region's largest navy (whose strategic doctrine has long placed a premium on asymmetric warfare) means it is well positioned to disrupt, on a low-level, continuous basis, the vital shipping corridor.
This asymmetric approach would not close down the strait. For Iran, the choice is not "to close" or "not to close," but rather to clog. A major global choke point, once considered safe, would no longer be so. In practical terms, vastly increased costs for shipping -- including security, insurance, and reinsurance for both cargo and crew -- along with permanent market instability, would be the new norm. For oil producers, particularly Iran, this would be a far more advantageous strategy than a full-on blockade.
Read more: http://www.pbs.org/wgbh/pages/frontline/tehranbureau/2012/01/analysis-subtle-sabotage-irans-other-option-in-the-strait-of-hormuz.html#ixzz1iuYuAHdt
Oppressed Iranians, do not fret over your suppression by your totalitarian regime.
We will soon liberate you of your oil....errr....liberate you.
Sincerely,
Team America™
[Fuck Yeah]
p.s. - North Koreans & Eritreans, we know we've kept you waiting for a long, long time, but the good news is that you are next-to-be-liberated, when you find large deposits of inexpensively extracted oil.
and oil is irrelevant if the EU collapses. So is SocGen i might add. And New York. And London. And Hong Kong...etc...etc...
If they close the Straits of Hormel how in the hell will we survive without bacon?
Excellent! LOL!!
There is a second issue. From the text above it is clear that anyone transacting with Iran cannot avail themselves of the US financial system. Obama says so.
There are a lot of aspiring capitalists in the world who will realize that if the US empire can do this to one state it can do it to any state. Therefore there will be a search for alternatives to the US financial system. There have already been initiatives in this direction from China and Russia. Expect these to gather momentum with the ultimate result that US dollar hegemony is called into question.
You have a choice. Follow the diktat of a dying empire turning into a 3rd world boondoggle or seek to transact business with entitites growing at 8% a year. What choice do you make?
There's a third issue.
We're already at war.
Even a neocon of the most ardent stripes would have to concede - if they wanted to be taken seriously - that attacking another nation's central bank (which is being done now upon Iran's central bank and monetary system) is an overt, unconditional act of war.
I'm not remarking upon whether we should or should not do this, and truth be told, I'm for fewer, not more, nations acquiring nuclear weapons capability (as I believe this destabilizes the world further; I hope that no one believes I have a double standard, as I believe some nations who possess nuclear weapons and refused to sign the NPT *cough* should be under the same 'gun' as Iran is), but economic warfare is warfare all the same.
the US has shown its hand; we will attack and wage war on anyone who is outside of or any rival to our system.
Nuclear weapons, via MAD, make deterring that impossible. The US has shown that we will push and provoke and test limits essentially daring anyone to go over this line. Until another nation stands up a conventional forces capability that can rival especially our navy and air force, the trend will continue.
Yeah well Einstein, you forgot one thing. All it takes is someone in charge somewhere who has gone nuts and pushes the red button, because well it just seemed like the wrong thing to do at the time.
im surprised that no one here has talked about how a higher oil price could streghten the dollor. all those petro dollars have to be recycled somehow, also not bad for the dollar if high oil prices kill the euro.
im totaly amazed that no one here has talked about the possiblity that this sabre rattleing is conected to ron paul's continueing success in the primery race(well hes not down yet) the iranian threat is good anti paul proaganda and means that no attention is paid to his economic ideas. it wouldnt be so far fetched to belivie that the iranians are in on this, in the same way that bush senior made a deal with the iranians to supply them with arms if they kept hold of the hostages until after reagan was elected.
my god, im on a roll three conspricy theories in one post
RP is an afterthought. Media is treating Scumtorum and Mormney as the front-runners and spending all its time discussing those two candidates because of what happened in Iowa.
Scumtorum's showing there has conveniently provided the false dilemma A vs. B that makes RP presently an invisible choice.
Saudi's won't be making up any shortfall. Shi'ite guerrillas will blow the pipelines.
Wrong.
Wrong.
Wrong.
Oil price is not informative about oil scarcity because OIL IS EVERYTHING.
If you spike oil, it destroys economies and thus demand and price plummets, WHICH MEANS NOTHING ABOUT ITS SCARCITY. This is not some Sunday drives that don't happen. There is no slack. If you slash demand, you slash someone's life somewhere.
There is no commentary about about just where the EU is going to find replacement 600K bpd. Libya won't be back online for a year. During that year, China's consumption and India's consumption will grow.
Oil is like food. It HAS TO BE CONSUMED. If you add people, you must consume more oil.
My prediction is hawkish talk, and no change. The EU will annouce they will embargo Iranian oil . . .someday.
Bullish on bicycles
hahaha!
Euro Bank run guaranteed cause the lower minimum reserve ratio in operation from 2% to 1% and the Added higher fuel cost for european... BOOM...
War with Iran is great news for the establishment coffers. Bad news for main street USA.
Armaments industry will flourish, of course.
So good news for parts of main street.
I build rat bikes as a hobby. It may be a hobby that pays off soon.
Embargo + not closing SoH = full on attack on iRan. Might as well declare war instead of pussyfooting like always you Anglo-fascists.
$200+ if it all goes down this way...
you know that we don't declare wars - it's keeping peace and prosperity
$200+? I don't know. I keep thinking though that when it comes to oil, everybody lies
how did it work again in the seventies? Oil-Shock, good priming for a nice price rise across the board
should make Bernanke, Krugman and the megabanks very happy...
I must say it is interesting Ghordius that destroying the value of Iran's currency as the US has done by attacking its Central Bank is not considered an act of war under the War Powers Act. Do you think we have a Congress in name only over here? We're certainly not a nation of laws anymore...are we....
you know goddamned well how we would respond to such a threat to our FRN.
The difference is Iran can't do much about it. Depending upon Russia or China for cover...lol.
We learnt that in previous attempts to do wtfever we wanted. Russia and China cover are only relevant to the UN. So now we don't even bother going that route.
Race-realist, they can do plenty about it. Watch what happens to the next US carrier that enters the Straits. Remember, Iranians aren't Wogs. They are Aryans. And they will fight to the death, just as they did against the last Isramerican-sponsored attack - Sadaam Hussein's mid-80s aggression. 1,000,000 dead Iranian soldiers and civilians, and Sadaam pulled back. Iran is way stronger now, and the longer the war goes on the more deeply involved Russia/China will get. 1-9-1-4.
great, USO will go now to 30 now <sarc>
It amazes me the stories and lies that are being told to prop up the U.S. Dollar. Keep oil going higher to mask the inflation of the dollar itself by war mongering. Also keeping the price going higher as they devalue the dollar through inflation so the Arabs don't wise up and ask for Gold as payment.
Sooner or later "a light bulb will go on" under those turban's !
Keep the oil above 65$ and the recession will last forever. God bless Republicans and there corporations for ruling the destiny of US and rest of the world.
Like I said above it will never goto $65 again as it will only go higher. They must keep the price up to keep the Arabs interested in trading oil in Petrodollars. If the price drops to low they will wan't some other currency as payment. (The budgets of these Nations are predicated on $85 oil and their printing presses are running too)
Accepting Pretty colored printed paper with past Presidents on them will only carry on for so long.
Start thinking people. Think MF Global bankruptcy. Curbing commodity and oil speculation needed to happen prior to a conflict with Iran to help prevent $150-$200 oil. I see a downdraft coming soon, ala Europe, bringing down the price of oil and other asset classes. This will allow a window of opportunity for a strike against Iran and an assured spike in oil, with a top no more than $120 short term and then lower from there as the offensive gains steam. Let's wait and see what actually happens, but that's my forecast.
I voted you down for the simple reason you have a woman's name. get back behind the sink.
window of opportunity my ass. the rest of the world (TROTW) has had a gutsfull of american nonsense and will respond with a force de frappe. 1000 to 1 casualties. anglo american empire has been begging for it for 175 years. anglo zionist empire has been given notice that false flags will be responded to with lethal and permanent force. you wanna call their bluff?
http://rt.com/news/iran-ready-block-strait-hormuz-361/
Iran says it will close Strait of Hormuz if crude exports blocked
Tehran’s leadership has decided to order a blockade of the strategic Strait of Hormuz if the country’s oil exports are blocked, a senior Revolutionary Guard Commander said as reported by Iranian press.
lol, what is the long haul trucker's breaking point as far as fuel costs?
as in when does the food stop getting delivered?
Any idea how many trucks are in a returning US infantry division?
But the military will not be delivering food to Kroger or Publix. The food will be sent to "social service" charitites (like the ones who received all of the recent Countrywide foreclosure settlement money.) Good luck getting any of that food unless you are currently on food stamps.
Industries haul's vary but a general rule is 58.50 to 62.50 per hour based on 15.00 per hour driver and 3.25 fuel depending on fleet size. In 08' with 130 to 145 per bbl oil and diesel at 4.25 to 5.0 per gallon, the transport industry was crushed. Smaller companies shut down in droves and continued into 09' to close.
The glaring issue inside transport companies is not only the increased fuel cost but the increase in tires, part's and overall maintenance of fleet cost. Some companies where able to able to charge a fuel floating fuel charge but not all. Margin's have crashed in the transport field along with good or high paying job's in some field's.
It is a real shame imo that we have insisted nat gas to power our transport fleet's. http://www.pickensplan.com/
Clean Energy Fuels has been a stong model with there set up of nat gas fueling station's on The I-10 freeway but it is just a drop in the bucket for what need's to be done to secure our food supplies imo.
This is a site that provides some good overall guages to the industry. http://www.genco.com/Transportation-Logistics/transportation-industry-trends.php
Iran doesn't have the stupidity or ability to shut down the Straits of Hormuz. I wish the focus would be kept on reality. Unfortunately, the world allows itself to be captivated by the fear of nonsensical things.
TheSilverJournal.com
Yeah let's forget that countless CIA analysts say Iran CAN shut down the Strait for weeks.
I assume you are referring to the same CIA whose sole purpose for over 40 years was to watch every thing the USSR did, yet missed the collapse of same USSR. That CIA?
yet missed the collapse of same USSR.
Because everyone in the CIA thinks the same right? Nobody in the CIA saw it right? Some people saw it coming a long way, CIA or not.
It's like saying that all economists are wrong because the MSM economists are wrong all the time. That's totally ridiculous.
And better forget the 2002 US wargame in which that nasty country RED sank half of nice country BLUE's Fifth Fleet and closed the strait.
I'll listen to what makes sense. Closing the Straits is a death wish for Iran and they know it.
Oil is going to $200 with the actual reason being the printing of currency and ultra low rates, not Iranian scares. Unfortunately, you, along with many others, are buying into the propaganda instead of thinking for yourself and putting it on Banana Ben and deficit spending Obama.
TheSilverJournal.com
It's interesting.
While fractional reserve banking Ponzinomics undoubtedly impacts the pricing of everything, including oil, high oil prices leading up to a Super Election is bad for the POTUS, all things being equal.
As for oil prices soaring as a result of the Straits of Hormuz being closed being "bad" for Iran, that depends on many potential consequences. In some scenarios, given a certain set of factors and outcomes, the higher oil prices go, the more politically and economically beneficial it is for Iran, so long as they have takers for their oil (and I do believe a compelling case can be made that they inevitably will, given the dynamics of the global petroeconomy).
So sad that Iran isn't taking orders from silverjournal. Or anyone else.
how? By actually sinking ships? That's absurd. The US would systematically destroy every single offensive capability Iran had.
Hopefully, the DC ZOGsters are thinking just like Trav. South Asia: where Empires go to die. March-April, 1942: IJN thrashes Brit Navy off Ceylon, signaling Imperial collapse. 1980s: Afghan jihadi defeat Russians, imperial collapse follows. Isramerica next.
doofus, you've lost your edge. it's not just iran. it's russia, china and others. china could simply self-sustain using USD bonds /treasuries converted to their local currency - through wage inflation.
it's simple accounting. iran 'sinks ships'. china s'elf sustains'. russia provides energy weapons. end of USA hegemony.
They can shut the Straits of Hormuz for about the time it takes our cruise missles to rain down on that area.
Shit. Iran is a net IMPORTER of gasoline. Yea, real threat there...we better bomb the shit out of them before they're able to make their own gas.
oh lol, (1) who is Iran? (2) does BIS, Iran(BIS(puppet)12) want the straits closed? (3) if so they will be closed, whether its the USN, Iran, or just a customs barrier, in the way.
i mean maybe the Iranians unleash the new BIS wartoy they got sold last week?
or the straits get nuked? (on top of Fukushima wouldn't that be a pisser?)
(i can see that in the long trail of tears to our new energy austere landscape)! /lmao!/
produced by Walt Disney! directed by George Lucas and Steven Speilberg!
Live in Taped Color on the WeLaugh Network! :)
/oh its too funny!/
So will Indonesia and China continue to subsidise oil domestically at these price levels to prevent internal uprisings or simply blow up ? It is not as if China can survive long inm a world of high oil prices driving food prices and the price of plastics ever higher - at the same time more and more Chines factories suffer credit squeeze and collapsing demand. The idea that Thw West loses and China gains is fanciful in a world of Chinese Mercantilism built upon transforming scarce global resources into cheap junk to be bought by insolvent Western consumers funded by Chinese trade surpluses
Iran blocks the Strait, China will invade Iran before the US.
Or, another possibility is that the EU & U.S. stop importing Iranian Oil (which is not possible, as oil is fungible, but I digress), and the Chinese get a big discount on much needed crude, this cements further cooperation between China & Iran (of the military and political types, at a deep level), and there's not much the U.S. or anyone else can or will be willing to do, given our highly interwoven global economy, where China is the largest factory and lowest cost producer for the world.
China should tell the US to go fuck themselves and that any attack on Iran will be an attack on China. Iran should be made full member of the SCO too.
There. Problem solved. No war on Iran. Israel shuts the fuck up, the US too.
If China did that, it would set off a war without question.
Hundreds of multinational corporations, many based in the U.S., have spent trillions building factories, R&D and other facilities in China, in order to maximize profits for decades to come, and they won't be denied - at least not without some form of recourse that attempts to make good on their massive capital investments, if even by other business channels (such as designing, fabricating and selling weaponry to Uncle Sam - say hello to the General Motors Drones & Intel corei16 guided JDAMv6.20).
Those are really transnational corporations which means they serve no specific homeland, only the universal interest is recognized as holy. Meaning profit. I'm sure Chinese authorities are in a struggle to keep these entities under their control.
China stands ready to dump treasuries should somebody make an "oopsy" in and around Iran.
"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes… Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
– Napoleon Bonaparte, Emperor of France, 1815
China could also NATIONALIZE all these corporations and tell them to go fuck themselves.
or they could just nationalize them and not say anything at all. just like the USA can nationalize Wall Street at any time now.
Wall Street has already nationalized the government.
TIS-- Just a side note to your rather good argument--The U.S. does not import any Iranian oil, and hasn't since the 80's. (Which doesn't mean we won't still get crushed by higher oil prices caused by a EU or worldwide embargo of Iran).
Let's just call it what it is: Western democracies are so broke that they've devolved into just stealing Iranian oil revenues. It's part of their currency wars.
Folks, there's no reason for the Iranians not to block the straights if they're not receiving money for the oil they're exporting. We teach 3 year olds this: you have to pay for the things you want. And when you steal their money, they no longer want to trade with you. If the Persian were smart, they'd settle a bi-lateral trade agreement with China and say "fuck all, we don't need dollars".
Siezing the Straits is an Act of War, and basically legalizes the liquidation of any Iranian in the area who thinks otherwise. BTW Iran already has bilateral trade agreements w/ China and most other countries that they do significant trade with that aren't settled in dollars.
Isramerica has been commiting Acts of War against Iran since the mid-1980s, Redneck. Still, you're well-named: violent AND stupid. BTW: when the EBT cards stop working, better put your running shoes on.
And the current iteration of Persia has been committing acts of war just as long... In their own words, the wizards the behind curtain that you cower before find my intelligence and experience scary, so might want to reconsider both your premise and your conclusion. War strips every individual caught up in it of both innocence and the right to plead to innocence. If that seems an unfathomable paradox, then perhaps you have not witnessed enough of the inevitable conflicting hierarchies of causes which meet in conflagration. Or perhaps you have some perverse predilection for Iran's particular breed of fascism over the United State's particular breed of fascism? In which case, you are most certainly not compassionate. Two children on playground can taunt each other and even come to blows. The consequences of two States engaging in such childish behavior are rather more severe.
Off Topic:
Ok, ok, alright. This has been making the rounds in various interpretive guise today: NOC Media Monitoring Initiative, like a lost index card from the Guy Montag file. But this is old news, really.
I was having coffee with my friend Harvey this morning and he was, well, cursing longhand at the thing. Not that the artifact was online and “public” but that the timing of the thing was off somehow, that this recent gambit of “self surveillance”, besides its lack of color, and its brutish disregard for the development of careful social apparatus ~ which allowed the populace to willingly accede to such Nationalistic pride in its most recent historical incarnation as in National Socialist Party ~ he disagrees with his colleagues’ opinion that imagine Americans won’t sniff things out because they will never see things coming.
According to Harvey,
“Today, with these debt zombie Versailles Treaty wannabes multiplying around the globe like Manhattan bedbugs, in their colorful little costumes of national debt and sovereign foreclosure, we have missed, missed, well... the art of it all. Instead of a rational step by step by step approach to the defenestration of liberty, our employers, in their, sort of... post modern dance interpretations of “E pluribus unum 2.0”, are trying to slam us with the social control manifesto implied in the likes of Homeland Security and their number one son the TSA, AND orchestrate this financial collapse, continue development of a final confrontation with China and her allies, all in one historic breath, with the finesse of a train boarding in a Tokyo rush hour. Its making my job, well, a job.“
While Harvey may be correct in this point if view we must all remember that Homeland Security and the TSA have withstood over 10 years of acquiescence, were established a full 8 years before we officially pulled the rehab tube to the global debt patient, and now 11 years before the NEW reinterpretations of the 1st Amendment begins to flower under such exigent circumstance as these we find ourselves in. There really has been plenty of time to develope the arc of national psychology to this point. How much time do you really think is necessary?
And as to China? Well I suggested they have been paying attention this decade past. Harvey raised his eyebrows and nodded as he drank a sip and steamed his glasses and cursed again, at the weather I suppose.
You are all on a list, somewhere. It’s just that, well, everything you publish online, every movement you make with your credit card, every subscription or meet-up group or charity you associate with is now part of your permanent file, somewhere. This time we don’t need to send the children to educational summer camps for indoctrination, and thus “self surveillance” the information comes to us.
At least the coffee was hot and we were in out of the weather and everywhere in D.C. I imagined “E pluribus unum 2.0” apparatchiks busy clicking up circus for later this year, smirking at the cold outside.
After Harvey left, mumbling about Iranian oil and some reports on the Tin Man Plan for Euroland he needed to attend, used the word Hormuz like one refers to an annoying inlaw about to loose the football pool, I retrieved my satchel from beneath the table and picked up where I had left off ~ in Morris Berman’s 2011 comedy: Why America Failed: The Roots of Imperial Decline
A Sunday quiz for my fellow ZH-ers. What do the following things have in common?
Central banks; taxation; inflation; globalization; energy markets; wars.
Lately what I've been seeing is that all of them are "about" the transfer of real wealth from a large number of workers to a small number of drones.
Answer: They all depend on oil. And nothing else.
Fu Manchu say Bring it on, Iran.
Of course the mighty Asian Fu is holder of UCO.
He stands to profit from your misfortune.
Fu have one more message.
To Barry.
Rotsa ruck with your next erection!
Firstly, the US and the EU is not going to penalize China or Russia for breaking sanctions - that's an empty threat and we know it. That's just grandstanding for domestic political consumption. Iran doesn't have to deal with either China or Russia in USD or EUR, so the US/EU has no leverage there as well. Plus Germany would never agree to penalize Russia or China - Russia is an important source of oil and gas for Germany, and China is an important export market for Germany.
Given this, I have a question and maybe the more knowledgeable here would be able to help me on this: Let's say Iran shut down the Straits of Hormuz, but wanted to keep doing business with China.
Could Russia then act as the middleman for Iranian oil exports i.e. is it physically possible to divert all those flows to Russia instead of through the Gulf?
I'm pretty sure if the US figured out this was going on - there would be a war immediately so that the US could take out the Iranian oil delivery infrastructure.
It's actually even easier than that.
Straits shut = War.
When All Resets.
ori
my/truth/
Sounds like SocGen is advocating an "attack first" strategy as well. Interstingly there's no mention of the word "economy" in this missive either. I would think "just the threat of a massive price spike in oil would lead to the collapse of our economy and of the EU in general and the end of us...Soc Gen. Now have a nice day." I think that would have been a nice rejoinder....don't you?
There has to be perpetual war otherwise the sheep will start thinking about the myriad problems at home and ponder on how to fix it by destablizing the status quo. A world war is even better.
there are loose nukes all over the place in this region. is that the type of "world war" you are advocating? a "shooting war" with nukes? cuz until you talk about winning something instead of warring something then the only thing that comes to my mind is total friggin' chaos. (what we have right now btw.)
Straits of Oil Slick
Well all, how good does it feel to own physical gold and silver now. What a comfort.
Maybe Saudia Arabia will make out on the spike but it will be their swan song as Natural Gas and Nuclear Power will shine. Germany with no nuclear power will be in quite the predicament.
And maybe, finally, we will have a coherent energy plan in the US.
Where do you think the SocGen traders have set their massive short entry points?
SCGLY:US
Soc Gen has been short Soc Gen since the sixes...
All we need to ask is: What do the Rothschilds want? What do the owners of the ponzi want? What do the financial elite everywhere want?
QE, QE and more QE. Endless QE, and every bank in sight bailed out.
An oil crisis helps that because then they have something to blame the price inflation on. Obama will then have the crisis he wants for martial law and no elections.
An oil crisis is very inportant to tptb. It is their cover, it is their reason, it is exactly what they need to keep power and bail themselves out.
And so we have an impending oil crisis. What a coincidence.
EU Energy Commissioner Gunther Ottinger, states that the EU can count on Saudi Arabia to make up the shortfall from Iran. Another rather convenient supply vacuum that benefits"
All in all a win/win situation for US-AIPAC inc., while one might add that a larger slice of the Islamic finance percentage as well via a once American owned asset (Iran's Central Bank/Bank Markazi/Chase-Citi in Fazlollah Zahedi era).
An ever-decreasing income, via currency devaluation and increasing unemployment, in a world of ever-increasing basic commodity asset classes via central monetary intervention, will be the new norm, as a result of the continuous artificial economic inflation by the same people who perpetuate the very systematic flaws which led to the current financial and political precipice.
Adding a $160 bo will guarantee a final nail in the coffin of the already stagnating economy, its disintegrated industry and the all but obliterated middle class, who will ultimately pay the price for the careless neoconian imperialistic behaviour of the US-AngloSaxon axis along with their financial predatory arms.
and thus "the illusion of control" is perpetuated. don't ask me what's going on...the information i get that is remotely informative is from the Zero Hedge commentariat. Needless to say Tyler Durden(s) has an Agenda as well...
... to restore sanity?