A delightful dance of geopolitical chaos has once again graced us with its presence, as oil prices pirouette upwards in response to Israel’s little spat with Iran. Who would have guessed that igniting tensions in the Middle East could possibly lead to higher crude prices? It’s almost as if history has a habit of repeating itself, much to the chagrin of consumers and the Trump administration’s ambitious dreams of cheap energy.
As the benchmark U.S. crude oil price flirted with $72 a barrel, climbing a modest 6% by late Friday, one might wonder if this is the universe’s way of reminding us that the laws of supply and demand still apply. The brief dalliance with $77 a barrel shortly after the fireworks began was a reminder that markets can be as volatile as a toddler in a candy store.
Now, let’s entertain the notion that Iran might play the part of the vengeful antagonist, targeting energy infrastructure or U.S. bases. Oil prices could ascend further into the stratosphere, making our wallets weep. Alternatively, if Iran’s response is more restrained, perhaps the market will grace us with a decline in prices. But let’s not hold our breath for too much rational behavior.
The usual suspects, U.S. oil companies and Middle Eastern producers like Saudi Arabia, are apparently in no rush to flood the market with more oil. Robert McNally of Rapidan Energy Group, a former energy adviser to President George W. Bush, assures us of this reluctance. One might cynically wonder if they’re savoring the higher prices like a fine wine, or perhaps they’re just waiting for the next geopolitical twist to make their decision.
In the meantime, President Trump’s quest to keep energy costs low and inflation at bay seems as elusive as ever. But hey, who needs cheap energy when you can have the thrill of watching global tensions play out like a never-ending soap opera? After all, isn’t that what makes the world of macroeconomics so delightfully unpredictable?
