Russell: It's time for the world to stop delusions about the Iran Energy Crisis.

By Clyde Russell

LAUNCESTON (Australia), April 7: The U.S.-Israeli war against Iran is characterized by miscalculations on the part of all parties involved, including those who are peripheral. But the real danger lies in the illusion of the magnitude of the energy crisis that will result.

Any nation that thinks it or another country can "win" the conflict is deluded. The conflict has now entered its sixth week.

Even if a ceasefire is reached and vessel traffic resumes through the Strait of Hormuz within the next few weeks, the global economy will still be facing an energy crisis.

To avoid making an already bad situation even worse, 'governments', 'corporations? and consumers? must think clearly.

First, the delusion that the reopening of Strait of Hormuz would solve current supply problems for crude oil and refined products as well as liquefied gas.

Second, the delusion that Donald Trump, the U.S. president, and his administration take rational decisions, and are aware of the economic damage they are causing to former allies from the Gulf, Europe, and Asia.

Third, the delusion that it's a crisis in crude oil prices when, in fact, there is an emergency with regards to supply, particularly for fuel-importing countries.

Fourth, you may think that your short-term self-interested policies will save your nation from the worst consequences.

China's end of refined fuels exports will ensure its domestic supply, but how long until this impacts on China's industries of export?

Some encouraging signs are that governments are beginning to recognize the severity of the crisis. Australia secured fuel imports by negotiating with suppliers like Japan and Singapore to continue supplying coal and LNG.

The question is whether the world can cope with the loss of 12 million barrels of crude and refined product per day, or more than 10% of the daily demand.

Prices and demand fell during the COVID-19 Pandemic as global lockdowns stopped people from traveling and consuming. The current shock is a supply issue which has caused prices to rise, and physical products such as jet fuel in Singapore have more than doubled.

Two factors are essential.

1. The Strait of Hormuz is effectively closed for the majority of ships.

2. Negotiations to end the conflict and reopen the Strait have so far failed, and the rhetoric of the major players indicates that there is little hope for a breakthrough in the near future.

Trump used expletives on social media to say that Iran could be "taken out", if they don't reopen the Strait.

His threats to "rain hell" on Iran come after he appeared at the White House at the weekend with a person dressed as an Easter Bunny, where he talked about egg supplies and threatened to destroy Iran's power plants and bridges.

The current state of affairs is best summed up by an image of the President of the United States standing with a fictional children's character associated with a religious celebration celebrating eternal salvation, while simultaneously threatening another country.

The fact that Iran has rejected the ceasefire offers made by the United States is not surprising, considering the violence of Trump's threats and the obvious buildup of U.S. forces in the area, as well as his history of breaking agreements.

There are many risks to be aware of

There is still a risk that the Gulf region will see more attacks and damage.

Iran has managed to strike Qatar's LNG plants and gas-to liquids plants as well as refineries, infrastructure and the United Arab Emirates in Kuwait, Bahrain, and Saudi Arabia.

Most ship owners are not willing to risk passing through the Strait of Hormuz. The few that do are doing so after Iran's approval and payment of tolls to Tehran.

Trump is left with three options.

1. Then walk away. He is trying to make the conflict look like a victory.

2. If you escalate the conflict, it could lead to a lengthy conflict that will cause massive damage to Gulf energy infrastructure. This would then result in a severe energy crisis around the world and repercussions of recession.

3. Accept a ceasefire, and a negotiated solution that is likely to be more favorable for Iran than the situation prior to the beginning of the conflict.

Third is the most likely to be the least damaging for the global economy. However, it appears the least probable given the statements and action of the parties concerned.

It is not possible to reduce the global demand for crude and refined products by 10%.

The poorest countries in Asia and Africa are the hardest hit, as they struggle both to source and pay for refined products.

Instead of turning inwards, all governments should work together to resolve the crisis.

They must understand the gravity of their situation.

The U.S. government and its president seem to be disconnected from reality, and they are now acting on behalf of allies who have been traditional.

In May, the main impact of the crisis will be felt by refiners in Asia who are struggling to find?crude.

Second-round effects, such as increased inflation, reduced global trade, job loss and social unrest, are likely to emerge in the second half.

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These are the views of the columnist, an author for.

You like this column? Open Interest (ROI) is your new essential source of global financial commentary. ROI provides data-driven, thought-provoking analysis on everything from soybeans to swap rates. The markets are changing faster than ever. ROI can help you keep up. Follow ROI on LinkedIn, X and X. (Editing by Jamie Freed)

(source: Reuters)