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 once the shooting started? Now the mess created by the U.S. and Israel has spread, with ramifications for the entire globe. Nice job, guys! 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, including nearly 900,000 bpd that 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 in the 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!
