Over the last 24 hours, President Trump has come up with a bewildering series of ‘solutions’ to the global oil crisis triggered by his war with Iran. He might seize all of the country’s oil wells. He may send the marines in to capture its main exporting hub, Kharg Island. He has threatened to bomb the country back to the Stone Age if it doesn’t re-open the Straits of Hormuz, while at the same time – apparently – he is very close to a ‘fantastic deal’ that will settle the entire conflict.
But will these threats work? Can Trump keep a lid on the unfolding crisis? Crucially, the markets are not listening to him anymore – and the price of oil keeps rising.
Brent crude oil, the key benchmark for Europe, rose to $116 (£88) a barrel overnight, adding to the pressure on inflation and interest rates across the developed world. The latest plan, if that is not too dignified a word, from the White House to bring it under control, is for the United States to take over Iran’s oil production. Trump told the Financial Times:
The oil market is out now of political control
To be honest with you, my favorite thing is to take the oil in Iran, but some stupid people back in the US say, ‘Why are you doing that?’ But they’re stupid people.
If that doesn’t work, and it sounds implausible right now, Trump seemingly has other plans to force Iran to do his bidding. Just this lunchtime he wrote on his platform Truth Social:
We will conclude our lovely ‘stay’ in Iran by blowing up and completely obliterating all of their electric generating plants, oil wells and Kharg Island (and possibly all desalinisation plants!).
Meanwhile, the British government is trying frantically to keep up with events. The Prime Minister has summoned business leaders to a briefing on the war. Meanwhile, the Chancellor Rachel Reeves is meeting with her G7 colleagues to come up with a response. But since Reeves and Starmer refuse to even contemplate the one practical step that might bring down the oil price a little – re-opening the North Sea to fresh production – it is hard to know how they expect to be taken seriously.
The significant point is this. The oil market is out now of political control. The war against Iran has taken out a significant chunk of production and made one of the key shipping routes through the Gulf too dangerous to use. The market is getting squeezed, with buyers scrambling around for any supplies they can get their hands on.
Over the medium term, this may not matter. Most countries are rapidly developing wind and solar alternatives, new nuclear power stations are being built, and countries such as Venezuela, with the largest reserves in the world, can increase production.
None of that will happen quickly, however. Against the backdrop of tight supply and spiralling demand, there is no point in President Trump simply trying to talk the price of oil back down again. It just won’t work.
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