<\/p>\n
Then they came for the food, housing, and every product I need to buy. But I have no money left to spend anyway \u2026<\/p>\n
With apologies to Martin Niem\u00f6ller\u2019s classic warning against apathy and meek acquiescence. But it is a scenario once again playing out on the global political and economic stage.<\/p>\n
The world is in the seventh month of US President Donald Trump\u2019s \u201cfour-to-five week\u201d war against Iran.<\/p>\n
And international strategic analysts warn things have taken a serious turn for the worse.<\/p>\n
Despite all assurances, the critical Strait of Hormuz remains essentially closed to global crude oil and liquid petroleum gas shipping. That represents 20 per cent of the global supply.<\/p>\n
Saudi Arabia\u2019s backup overland crude oil pipeline to the Red Sea was bombed on Thursday. That cuts another 5 per cent from global flows.<\/p>\n
Saudi Arabia\u2019s backup shipping route, through the Red Sea\u2019s Bab el-Mandeb Strait (Gate of Tears), is also now threatened. Houthi rebels at the weekend seized strategic islands in the waterway and the high ground overlooking the Strait itself.<\/p>\n
Meanwhile, the ongoing campaign by Ukraine and Russia to destroy each other\u2019s infrastructure and shipping remains relentless. That\u2019s another 1.5 per cent.<\/p>\n
The 47th President of the United States, however, insists everything will \u201cwork out just fine\u201d.<\/p>\n
President Trump, 80, was hitting the luxuriously green golf courses of Ireland as news broke of the latest military setbacks in the Middle East. <\/p>\n
He wasn\u2019t worried.<\/p>\n
He said the Houthis had already contacted US diplomats to stress that they \u201cdon\u2019t want to fight with us\u201d and would \u201cmuch prefer not having us involved.\u201d<\/p>\n
But the US is already deeply involved.<\/p>\n
Diesel prices there have soared. Reserves are at record lows. And US consumers must now pay more than $US6 ($A8.4) for every gallon (3.8l) they put in their tanks.<\/p>\n
Similar price shocks are now rippling through the global economy. Including Australia.<\/p>\n
And most of the reserves used to cushion similar shocks in recent months are drying up.<\/p>\n
\u201cHaving both straits closed has long been a \u2018sum of all fears\u2019 Middle East energy crisis,\u201d states strategic analyst Tyler Rogoway. <\/p>\n
\u201cThis was always Iran\u2019s fallback plan. This is also why they [Iran] held them [the Houthis] back during Epic Fury.\u201d<\/p>\n
Hip-Pocket Reality<\/p>\n
\u201cHormuz Oil Volumes are BACK,\u201d President Trump proclaimed on social media. He posted a graphic claiming 20 million barrels passed through it that week, up from 18 million the week before.<\/p>\n
That compares to about 110 million barrels per week before he started the war.<\/p>\n
Shipping trackers<\/a> show just seven tankers (that had their navigation systems turned on) passed through Hormuz the day he made the claim. <\/p>\n Before the war, an average of 67 tankers would make the transit daily.<\/p>\n Less crude oil means less petrol, diesel, plastic resins and fertiliser.<\/p>\n Diesel is in particular short supply. And it\u2019s about to get worse.<\/p>\n Gulf diesel exports are about one quarter their pre-war level. Russia has had to ban exports to fuel its own war-wracked economy. And the world\u2019s remaining refineries are already running at 95 per cent capacity.<\/p>\n All up, global consumption is outstripping supply.<\/p>\n That\u2019s bad news for the Australian economy.<\/p>\n So much so Canberra may soon have to make a tough choice: prioritise food? Or iron ore?<\/p>\n \u201cThe diesel fuel price shock caused by the Iran conflict has exposed an uncomfortable reality that mining, one of Australia\u2019s most crucial industries, is overwhelmingly \u2013 and increasingly \u2013 dependent on imported fuel,\u201d Cyan Ventures analyst Pulkit Athavle argues for the Australian Strategic Policy Institute<\/a> (ASIP). <\/p>\n Mining consumes about 32 million litres of diesel a day (about 35 per cent of Australian turnover). <\/p>\n But the Australian harvest season is almost upon us.<\/p>\n The International Energy Agency (IEA) requires its members to keep a 90-day supply in reserve for just such crises. Canberra has consistently barely maintained 30 per cent of that level. <\/p>\n For diesel<\/a>, it\u2019s had to pay extra to raise that buffer from 33 days this time last year to the current 42 days. <\/p>\n And that\u2019s only because other nations maintained the strategic reserves needed to buy the global economy extra time.<\/p>\n But there\u2019s nothing left to show where that came from.<\/p>\n Bottom of the Barrel<\/p>\n Australia\u2019s Macquarie Group predicted in March that crude oil could soar to $US200 a barrel by June if the Strait of Hormuz remained contested.<\/p>\n That didn\u2019t happen.<\/p>\n The co-ordinated release of 400 million barrels of global oil reserves, especially from China and the United States, has kept prices well below $US100.<\/p>\n But US strategic oil reserves are reaching critical lows.<\/p>\n And China is also being forced to tighten the tap. <\/p>\n S & P Global Ratings chief economist Paul Gruenwald last week said a Chinese withdrawal from oil markets in March had \u201ckind of saved the day\u201d<\/a> as the oil-price \u201cdoomsday scenario\u201d unfolded. <\/p>\n But it\u2019s having to re-enter the global market as a buyer because its cut-price Russian fuel has gone up in flames under Ukrainian drone attacks. <\/p>\n Now Saudi Arabia\u2019s Abqaiq to Yanbu pipeline \u2013 a 1200km bypass to Hormuz \u2013 has been blasted offline.<\/p>\n Riyadh says it closed it as a \u201cprecaution\u201d. <\/p>\n But satellite photos show significant damage at key points along the pipeline.<\/p>\n It was previously attacked in April. But Saudi Arabia insisted it was back pumping at full capacity (7 million barrels per day) before the recent strike.<\/p>\n Economists estimate it had actually been shifting 4 to 5 million barrels per day.<\/p>\n Combined with the Houthis\u2019 new threat to the Red Sea\u2019s narrow Gate of Tears, that leaves only the Suez Canal as a safe-ish shipping route to the Middle East.<\/p>\n Houthi rebels are now ideally positioned to attack shipping in the Strait with missiles, rockets, suicide boats and artillery. They occupy Perim Island in the narrows, and the high ground on the Yemen mainland.<\/p>\n Brent crude oil prices leapt to $US107.9 per barrel<\/a> as a result. That\u2019s up 60 per cent over the past year.<\/p>\n Heating oil is up 119 per cent. <\/p>\n \u201cMarket tightness is now most acute,\u201d the IEA\u2019s most recent oil market report<\/a> states. <\/p>\n Oils Ain\u2019t Oils<\/p>\n