RANT: LEAVING ON A JET PLANE, DON’T KNOW WHEN I’LL BE BACK AGAIN…

 

RECALL THE PROVERB about the hole in the bucket—you know, the one where the farmer goes to the well to draw water, but no matter what he does the hole determines the carrying capacity of his water bucket. He will need to make more trips to collect the same amount he previously collected, costing him time, energy, and ultimately money. Or he will make do with less. Yes, he could repair the bucket but that's beside the point: In systems theory, there is the principle that an organism or an organization is only as strong, as viable, as its weakest link:

 

“The principle that "a system is only as strong as its weakest link" means a system's overall performance is limited by its most vulnerable component. [Italics mine] In system theory, this bottleneck or constraint—whether a person, process, or technology—determines the maximum capacity and failure point of the entire system. Strengthening the weakest part yields the highest improvements.” (Google AI)

 

THE STRAIT OF HORMUZ is the ‘weak link’ in the system of transporting crude oil and distillates from the Persian Gulf to the world. Functionally, it hadn’t been one before February 28 when Israel and the United States decided to once more attack Iran in round two of their illegal war of aggression against the Persian state. Prior to that, the Strait had been open and freely navigated by all. Iran closed the Strait (the sovereignty of which it shares with Oman), to vessels from nations hostile to it and those aiding and abetting their activities. Most Gulf oil goes to Asian markets (80 to 90%), with China receiving over one-third of all deliveries. Over 50% of China’s oil comes from the Gulf through the Straits of Hormuz, while ninety-eight percent of Filipino oil and nearly 90% of Japan’s crude oil comes from the Gulf. These countries and others (Italy, Greece, Poland, Spain, Malasia, India and Pakistan) have negotiated deals with Iran and now pay it toll fees, some as much as two-million dollars per tanker, for safe passage through the Strait. That amounts to billions per year in increased revenue which will go towards rebuilding Iran’s infrastructure damaged during the United States/Israel-Iran war begun in June of last year and reprised on February 28. There has been a tenuous ceasefire since April 7.

 

Note: Dissatisfied with the pace of peace negotiations brokered by the Pakistanis in Islamabad, on April 13 the United States imposed its own blockade (a blockade of a blockade!), denying passage for ships bound for, or leaving from, Iranian ports. This was done to pressure Iran to open the Straits to all maritime traffic free of charge, as it was before the war.* [Surely, war planers in the Pentagon considered closing of the Strait was something Iran would probably do to gain leverage in future treaty talks? Why is the U.S. deliberately shooting itself in the foot with such foolhardy and reckless actions? Ed.] Over three-quarters of Iran’s oil shipments have, thus far, been confiscated by Trump’s illegal blockade. But with millions of barrels of oil already in tankers at sea and in its shadow fleet ships, with pipelines to Turkey and the Caspian Sea, and with higher crude oil prices due to market unease over how the war is gaming out, all these mean that Iran can sell its oil at premium prices, resulting in an overall increase¹  in state revenues. 

STILL, there's the problem of Iran’s oil storage capacity being nearly full, which means oil wells must be capped, until their flow can be restarted at a future date (not an easy process.) And, don't forget the same problem exists for the rest of the Gulf States with uncapped oil wells filling up storage capacity, necessitating more and more wells be temporarily shuttered, adding to the time it will take to restart them and ramp up production after the war ends. 

👉That's unless Trump does something really stupid like starting the bombing campaign again. Which would trigger Iran to respond with a massive missile attack, decimating the Gulf states (and Israel, and American bases in the Middle East) and their oil infrastructure, taking offline 20% of the globe's oil supply. The resulting damage to economies throughout the world in the wake of such a clusterfuck would be incalculable.

 

MEANWHILE, in early May as I write this, countries around the world are beginning to feel pressure points in their economies as looming shortfalls in crude oil supplies are ‘baked-in’ and all but inevitable, with the resulting supply-chain disruptions already being felt in Asian countries, especially those with inadequate strategic petroleum reserves, or ones that are hard-pressed to pay for more expensive petroleum products. By now, most tankers that exited the Straits prior to February 28 have reached their destinations and have discharged their cargoes. Once that is used up, there will be a 20% shortfall in available crude until production levels once more meet the demand. Unless something is done to bring this war to an end real soon, some commentators predict a global recession by the summer and the possibility of a serious depression this autumn—one that could be on par with the Great Depression of the 1930s—unless crude oil and petroleum distillates are flowing full-throttle within the next few weeks. 

The American ‘counter-blockade’ against Iran must be lifted before the Iranians will even consider talks on opening the Hormuz Strait to pre-war traffic levels. Gulf states that aided Israeli and American attacks are not allowed to use the Straits at present. Global shortfalls in crude oil will mean shortages in dozens upon dozens of plastic products made from oil, including distillates like diesel and jet fuels.

 

Other Gulf exports like LNG, urea and ammonia (used in fertilizers), aluminum, as well as helium used in the manufacture of computer chips, will soon be in short supply. 

And a shortage of certain pigments made with petroleum distalates, along with an accompaning price hike in the available stocks, has led one Japanese (potato) chip manufacturer to print their bags in black and white [The Horror! The Horror! Ed.] 

👉ALREADY, farmers here in Canada are predicting lower crop yields later this year and next summer, due to increased cost of fertilizers, herbicides, diesel fuel, etc. Canada uses approximately 2.4-million bpd of oil, but nearly 900,000 bpd is imported and sold primarily to eastern Canada. In an oil crunch, I guess Canada could export less to fulfill the country's needs or access the nearly limitless Alberta oil sands. Problem there is getting the oil from the west to the east coast. There are no east-west pipelines for a variety of reasons, and so Canadians should not be too sanguine about easily accessing oil diverted from exports or topping up our tanks with oil sands bitumen in a pinch. All may not go according to plan. And it's interesting to note that Canada is the only member of the G-7 countries that does not have a federally-controled strategic oil reserve, relying, instead, on the vast bitumen deposits out west. Hmmm...

 

AIR LINES were the first headline grabbers, with an insecure supply chain for jet fuel causing the immediate cancellation of flights or the elimination of air travel routes altogether. (Who wants to buy a return flight ticket when jet fuel might be in short supply at the other end.)

IN EARLY APRIL, farmers in Ireland protested the rising costs of diesel by creating roadblocks with their tractors and other forms of peaceful demonstrations. FOLKS, THE PAIN WILL COME HERE in the next few weeks with the fuel price rise (despite the Liberal government temporarily removing the federal sales tax on gasoline). Expect scarcity of some food products and consumer goods along with price increases. 

 

👉As long as the Straits of Hormuz remains closed, things will only get worse. A note, passed from the Iranian delegation to Pakistani mediators listed five prerequisites that the Americans and Israelis must accept before negotiations over Hormuz could be discussed. These ‘givens’ to any future treaty run headlong into America’s maximal demands of "zero enrichment" of nuclear fuels and limits on Iranian missile forces; etc.. It’s hard to see where a deal can be made, especially given the abysmal track record of Trump’s negotiating team of Mutt and Jeff Kushner and Witkoff; the continued use of those two suggests to all and sundry that the Americans are not interested in genuine peace negotiations. If they were, they would not send these two unserious people to do the hard work of negotiating on behalf of the American government.

 

IT'S a knock-em, smack-em, drag-out match to see who will groan first--Trump or Iran. It's about who can withstand the pain the longest as world markets crash and economies slide into Recession, and even into that razorback-filled pit of Depression, as supply chains crack and crumble. The United States started this thing, with Zionists at home and abroad aiding and abetting, and arm-twisting the American president into yet another foolish and costly escapade in the Middle East. It's not just Epstein's ghost that haunts the sleep of President Trump, it's also the Three Ghosts of Modernity: Hubris, Indifference and Envy.

 

👉I THOUGHT I would get back in writing mode now that Trump’s gone to China and all of us can take a breather and walk through sunlit fields far from The Donald's rollercoaster ride to Hell. Perhaps the Chinese will keep him. Wouldn’t that be nice?     

 

CHEERS, JAKE. _____________________________________

 

* AS I UNDERSTAND IT, Iran’s blockade is legal because the Strait of Hormuz waters lay within its (and shared with Oman’s) maritime territorial waters. The United States is in breech of international law because it has no jurisdiction to seize Iranian ships in the Gulf of Oman’s waters. Iran’s blockade of this vital ‘choke point’ in the maritime supply chain for oil may set a precedent for other such bodies of water throughout the globe. 

 

1. Recall that the United States originally allowed Iranian oil shipments (and Russian oil which remains tariff free) to reach their destinations, thus keeping the international price of oil from climbing too quickly. They subsequently placed sanctions on any country buying Iranian oil. Perhaps the most important aspect in this whole kerfuffle is the willingness on the part of more and more buyers to purchase Iranian oil using local currencies, chiefly the Chinese Renminbi (RBM) instead of U.S. dollars, thus avoiding American scrutiny of their dollar-trade activities. Not using the USD or “petro dollar”, is a sign of the weakening hegemonic power America exerts over global financial markets, with more dominoes set to fall in the coming months and years. 

Stay tuned!