{"id":44823,"date":"2023-08-05T10:18:30","date_gmt":"2023-08-05T14:18:30","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/will-iran-block-the-strait-of-hormuz-its-back-to-the-80s-for-oil-geopolitics\/"},"modified":"2023-08-05T10:18:32","modified_gmt":"2023-08-05T14:18:32","slug":"will-iran-block-the-strait-of-hormuz-its-back-to-the-80s-for-oil-geopolitics","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=44823","title":{"rendered":"Will Iran Block the Strait of Hormuz? It’s Back to the ’80s for Oil Geopolitics."},"content":{"rendered":"
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Big shifts in global energy markets are putting new light on old problems. To see that in action, look to Iran.<\/p>\n

The U.S. is considering putting armed military personnel on civilian ships in the Persian Gulf to deter Iranian attacks, The Wall Street Journal and other outlets are reporting. That has raised fears of a return to the dark days of the 1980s, when the U.S. fought a brief naval war with Iran in retaliation for mining the Persian Gulf. And that concern over oil security is coming up, even though the U.S. produces vastly more oil and gas than it used to\u2014and is in the midst of a big shift toward renewable energy. How much has really changed?<\/p>\n

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\u201cThe United States exports a lot more energy than it did in the past, but at least in my view, it hasn\u2019t really affected the U.S. commitment to the security of the Persian Gulf,\u201d said Gregory Brew<\/a>, an oil historian and energy analyst with the political-risk firm Eurasia Group. Brew spoke Friday in an interview on Barron\u2019s Live.<\/p>\n

A lot of diplomatic and legal wrangling would need to happen before any U.S. troops set foot on private ships. It doesn\u2019t seem imminent. Still, \u201cthe U.S. is responding to what they see as being a consistent Iranian threat to shipping in the Gulf,\u201d Brew said. Despite recent talk of some kind of new understanding between the U.S. and Iran, tensions are getting worse, not better, he said. <\/p>\n

Iran has the power to shut down oil shipments through the Strait of Hormuz, an action that would have major consequences for the global economy. But that\u2019s also what holds Iran back. \u201cIt has a willing customer in China, who\u2019s taking more than a million barrels a day in Iranian oil exports,\u201d Brew said. China recently helped Iran reduce tensions with Saudi Arabia. Middle East energy issues still have a big influence on global geopolitics. <\/p>\n

This back-to-the-future episode gets at the analytical messiness of the so-called energy transition. That phrase comes up constantly these days. You\u2019ll find talk of the \u201cenergy transition\u201d in everything from the earnings calls of oil majors such as Exxon, to President Joe Biden\u2019s speeches, to the demands of environmental activists.<\/p>\n

They can\u2019t all mean the same thing. A transition to what? Trying to answer that question is revealing, Brew said.<\/p>\n

\u201cFossil fuels\u2014oil, gas, and coal\u2014still account for the majority of global energy consumption,\u201d Brew said. \u201cWe know that a transition is happening, and we know that it\u2019s going to affect the world. But the problem comes in determining where the attention should be fixed,\u201d he said.<\/p>\n

He continued: \u201cShould we be putting our attention toward electrifying the grid, building as much wind and solar and nuclear and geothermal capacity as possible? Should we be focusing on hydrogen and the production of clean hydrogen for decarbonizing steel or decarbonizing cement and fertilizer manufacturing? Should we be thinking about oil and gas and coal, as they still form an important part of our energy mix?\u201d<\/p>\n

That last point is important. Oil prices have risen for six straight weeks. Brew expects them to stay in the $85-to-$90 a barrel range for the second half of the year, barring major shocks. Longer term, the Biden administration and other governments are trying to kick their carbon addictions by promoting electric vehicles and other strategies. But it isn\u2019t clear that means we\u2019ll be using less oil any time soon.<\/p>\n

\u201cEconomic growth driven by decarbonization or driven by a desire to move away from a dependence on fossil fuels, that could see an increase in oil consumption,\u201d Brew said. \u201cOil isn\u2019t just used for gasoline. It\u2019s an input in practically everything. As we use less gasoline, we might very well need more benzene or kerosene or bitumen or petrochemical feedstock.\u201d<\/p>\n

Governments have become more willing to intervene in natural resource markets. But there\u2019s another big difference from the earlier era of Middle East oil fights: It isn\u2019t just big, energy-consuming countries like the U.S. trying to make sure they have enough to fuel their economies. \u201cResources nationalism,\u201d Brew said, is affecting how countries think about resources they produce and export as well as what they consume. Chile is a good example. It recently decided to nationalize production of lithium, a material much in demand for the production of EV batteries. Investors are watching closely.<\/p>\n

\u201cThis is arguably the largest or one of the largest economic transformations in human history,\u201d Brew said. The shake-up is just beginning.<\/p>\n

Write to Matt Peterson at matt.peterson@dowjones.com<\/p>\n<\/p><\/div>\n<\/div>\n