Lyn Alden, best-selling author, discusses her book 'Broken Money' and explores topics such as the rise of digital currency, the influence of financial technology on human rights, net international investment position, the global impact of energy, and investment strategy. The podcast also includes analysis of recent developments in crude oil markets and technical levels.
Geopolitical conflicts in the Middle East can potentially disrupt the already fragile global oil market by leading to economically irrational decisions by oil-producing nations.
The ongoing conflict between Israel and Hamas contributes to rising tensions in the region, which may have broader consequences for oil-producing nations.
Historical oil embargoes have proven ineffective in achieving political objectives and often result in unintended consequences.
Deep dives
The Fragile Global Oil Market
The global oil market is already fragile with OPEC countries producing at capacity. The risk of an escalations in the conflict between Israel and Hamas could further destabilize the already vulnerable oil market. Russia-Ukraine tensions also pose a risk, as Russia may consider taking economically irrational actions, such as cutting oil production, to serve their political agenda. The key concern is the potential for broader regional conflicts to lead to economically irrational decisions by oil-producing nations, which may impact oil prices and stability in the market.
Significance of Geopolitical Developments
The ongoing conflict between Israel and Hamas adds to the rising geopolitical tensions in the Middle East region. The recent violence and atrocities escalations cannot be undone and are likely to result in a long-standing rise in tensions. While there is no direct risk to oil production in Israel or Gaza, the potential for broader regional conflicts to develop and impact oil-producing nations is a cause for concern.
Vulnerability of Oil-Producing Nations
Many oil-producing nations are already producing at maximum capacity, leaving them little room to increase production in response to geopolitical events. The risk lies in the possibility of these nations making economically irrational decisions to support their political agendas, which may disrupt oil markets. The assumption of rational expectations theory, where countries act in their economic best interests, may not hold in scenarios where political priorities take precedence over economic considerations.
Assessing the Risk
While there are concerns about the potential impact of geopolitical conflicts on oil markets, it is important to assess the extent of the risk. While some voices have raised alarm bells, others have a more moderate view. The risk of economically irrational decisions by oil-producing nations impacting oil prices remains, but the exact outcome is uncertain. Ongoing monitoring and analysis of the situation is crucial to understand the implications for global oil markets.
The Failure of the Oil Embargoes
The podcast episode discusses the historical failure of oil embargoes as a means of achieving political objectives. The episode highlights three major oil embargoes - in 1956, 1967, and 1973 - and explains how all of them ended in failure. The declared objectives of these embargoes, which included forcing Israel to return to its 1967 borders and stopping Western support for Israel, were not achieved. Additionally, the podcast emphasizes that the embargoes had unintended consequences, such as strengthening Israel's position and increasing Western support. The episode concludes that the oil embargoes of the past serve as a lesson that oil cannot be effectively weaponized.
The Impact on Gas and Geopolitics
The podcast also explores the impact of the Israeli-Gaza conflict on gas markets and geopolitical dynamics. It highlights that the closure of the Tamar gas field, due to its proximity to Gaza, has led to a reduction in gas supply to Egypt and Jordan. This, in turn, affects Europe, as Egypt's re-export of gas as liquefied natural gas (LNG) is impacted. The episode discusses how the closure of the Tamar field and the overall conflict contribute to the diminishing prospects of a gas pipeline from the Eastern Mediterranean to Europe. It states that the options for Europe to substitute Russian gas are dwindling, with the United States and Qatar remaining as the only viable alternatives. As a result, Russian gas is likely to continue flowing to Europe for the foreseeable future.
MacroVoices Erik Townsend and Patrick Ceresna welcome back best-selling author, Lyn Alden. They'll talk about her new book Broken Money, before moving on to discuss the end of the Peace Dividend, energy scarcity, and much more. https://bit.ly/46VAuBR
