Fuel shock

Fuel shock | Daily Tribune

If it’s any consolation, motorists across the world are feeling the exact same shock. “This is essentially the biggest supply shock at least in modern global oil market history,” one energy analyst said.

Unfortunately, no one at the moment can honestly predict how long the US/Israel war on Iran will last.

If the war is not resolved by the end of the month, energy analysts say it could push global oil prices above 2022’s peaks, with some scenarios forecasting the price hitting $150 per barrel.

As for the war itself, a Middle East expert contends that both sides are preparing for a prolonged conflict.

At the moment, “the campaign appears to have moved through several overlapping stages: leadership decapitation, systematic military degradation, attacks on the defense industrial base and now economic pressure targeting energy infrastructure,” Middle East analyst Nicole Grajewski told the Carnegie Endowment for International Peace’s Middle East Program last Monday.

In the meanwhile, the US has demanded Iran’s unconditional surrender while Iranian officials have rejected ceasefire proposals, indicating that there won’t be a political settlement soon.

With the political positions of both sides remaining far apart and hardening, it “suggests the most dangerous phase of the war may still lie ahead,” says Grajewski.

Though the war on Iran directly involves only a few combatants, it reverberates all over, especially since the war effectively closed the Strait of Hormuz, “the narrow waterway next to Iran that serves as a superhighway for a fifth of the world’s oil.”

With oil tankers virtually stuck at Hormuz, both energy import-reliant Asia and Europe face an unprecedented energy crunch that threatens to derail their economies.

Such crisis-proportion prospects, also threatening to spread quickly, triggered various stopgap measures all across Asia, the top destination of Middle East oil and gas.

These policy measures include Taiwan stockpiling new oil; South Korea imposing a cap on gas prices for the first time since 1997; Japan releasing its oil reserves; fuel rationing and electricity conservation efforts by some countries; and here, Mr. Marcos Jr. ordering a four-day workweek for government offices amid moves to exorcise the taxes on fuel.

Interestingly, the first wave of domestic fuel price hikes generated confusing buzz on whether or not oil companies took undue advantage of the crisis.

Yet, rising fuel prices are simple enough to understand. When gas stations know their next delivery will cost more, they usually raise prices preemptively, before the more expensive fuel even arrives. That hedging isn’t greed but vanilla capitalism.

The fuel price hikes, meanwhile, prompted confessions by dejected Department of Energy officials that they’re basically helpless on fuel price cap proposals without amendments to the Oil Deregulation Law or without the grant of emergency powers to the President.

Having said that, eye-popping fuel prices and their aggravating effects activated hallucinatory shivers about the looming dark catastrophe hovering over our day-to-day lives, our livelihoods, the costs of our basic goods and our food.

With that, calmly prepare and plan for the worst, survive and perhaps pray.