Huny Badger RIGHT WING TRIBUNE–
The rift between Saudi Arabia and Iran has quickly ballooned into the worst conflict in decades between the two countries.
The back-and-forth escalation quickly turned the simmering tension into an overt struggle for power in the Middle East. First, the execution of a prominent Shiite cleric prompted protestors to set fire to the Saudi embassy in Tehran. Saudi Arabia cut off diplomatic relations and kicked out Iranian diplomatic personnel. Tehran banned Saudi goods from entering Iran. Worst of all, Iran blames Saudi Arabia for an airstrike that landed near its embassy in Yemen.
Saudi Arabia’s Sunni allies in the Arabian Peninsula largely followed suit by downgrading diplomatic ties with Iran.
Saudi Arabia and Iran are moving closer to a direct military confrontation that has the potential to disrupt Middle East oil supplies and push crude oil prices back towards the $300.00.
If a conflict happens, oil prices could increase 500 percent.
A jump in oil price and weakening of US Petro dollar (and strengthening their own currencies and pivotal role) is in the interest of IRAN & ARABIA.
That’s a dream scenario for American frackers who will have to pump oil as fast as they can to make up any supply shortfall to America’s allies.
For several years, Saudi Arabia and Iran have been trying to resolve their religious and political differences by fighting proxy wars that had little impact on oil prices. For a simple reason: they didn’t want to cause any disruptions in the flow of oil from the Persian Gulf. Besides, Washington has been the de-facto guarantor of the free flow of oil from the Gulf to its Asian and European allies.
“In case there is ‘a military accident’ in the Arabian Gulf, the oil supply route could be seriously disrupted,” says Athens based shipping expert Theo Matsopoulos. “When the markets are in critical point they are more sensitive and they translate facts more violently than they would during times of stability. It is not necessary for the Strait of Hormuz to be fully blocked, as happened in the Suez Canal in 1956. The expectation of a blockade and the potential for disruption could cause turbulence and shape a bullish market for crude oil. All of the affiliated parties will need to be hedged and they will start buying long positions, inflating the price to levels above $60/barrel.”
“The biggest gainers will be the US frackers,” says Matsopoulos. “With an extremely wide break-even range from $32 to $55 per barrel, an increase in the oil price to levels higher than $50 will make the overwhelming majority of them smile. The US will soon be able to finance its trading deficit and solidify even more its position as a major oil exporter. The longer a potential crisis in the Middle East lasts, the more the market share of the US companies will increase — because apart from prices and commodities the political stability of the USA can act as a guarantee for a smooth supply of oil for many consumers.”
That’s why Washington may do little if anything to stop a direct war between the two old adversaries. And Russia may go along with this scenario, as higher oil prices will benefit its own oil producers.
Huny Badger is a Veteran who served our country as an Army Combat Medic.
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