Discussion

Oil hits $100 a barrel despite deal to release record amount of reserves

msy: This theory of how the US loses in Iran is looking increasingly likely: https://kasperbenjamin.substack.com/p/why-the-us-will-lose-t...It's going to be incredibly difficult to stop Iran being able to kneecap both the global economy and in particular the gulf states, who are going to be motivated to put maximum pressure on the US to sue for peace. Incredible hubris and a lobotomised diplomatic and intelligence infrastructure in the name of ideological purity, quite the combination.

measurablefunc: That's because oil tankers are going up in flames: https://www.youtube.com/watch?v=OTzdxq0trb0

npn: [delayed]

Waterluvian: I think it’s wild to me just how much my mainstream news doesn’t feel like it’s covering some of what’s really going on. I have to go to YouTube to see that Iran is successfully fighting back in many ways including hitting oil tankers and depots.Not that I’m claiming the CBC and such are doing something sinister here. Just that I no-longer get the full story vibe I recall getting back in previous U.S. wars.

macNchz: I was just talking with a friend about this on Sunday, just before the big oil price runup—it was very curious to me that I had had to hunt around a bit for coverage of what was going on with the strait.Closure was something I had known was a risk with any conflict with Iran after learning about the Tanker War in some politics class in college, and following the various threats over the past 15 years or so. It seemed like something that should have had tons of coverage as soon as I heard the US had attacked Iran, and I wanted to know what was actually going on with it...yet all of the mainstream press seemed to skirt around it until oil prices finally spiked on Sunday, even though traffic through the strait had fallen off a cliff a week beforehand.

heavyset_go: PBS has been alright in this regard

colechristensen: They're all afraid of America's dictator whose only interest is his own personal image. This is how corruption kills nations, overbearing unchecked power meeting a lack of bravery or conviction in those who matter.Maybe Le Monde give the right balance?https://www.lemonde.fr/en/

yyyk: "fighting back" == blowing 3rd party civilian installations.

Animats: Saw a Chevron station in Silicon Valley today with a price above $7/gallon. That's not typical, but it's real.

shubhamjain: You might expect events like this to fundamentally change the global order or bring some sanity to U.S. policymaking. But nothing is going to change. It will be chaotic few years, but soon enough, everything will be conveniently forgotten. Iranian/Syrian/Afganian threat will reappear, the war-mongers and Israel-lobby will once more push for pre-emptive strikes, assassinations of leaders or generals. Rinse and repeat.At its core, the problem is a militarized, propaganda-driven state masquareding itself as a necessary guarantor of global order, while its sole objective is nothing more than letting no other nation threaten its supremacy. And much of the world continuing to accept that narrative either because of lack of alternatives or out of necessity.

itake: 1/ When authors use AI for editing, it reduces their credibility.2/ As much as I don't like the current administration (and Israel leadership), there is absolutely no way the assumptions this article makes about them are false.There is no way the US/Israel didn't calculate that:- the straight would be closed- a new leader may represent similar idiologies of the past leader.Everything that has happened so far (in regards to Iran attacking neighbors) has been extremely predictable. There is just no way these weren't calculated in.

Barrin92: >there is just no way these weren't calculated in.the American government is publishing war footage intercut with Call of Duty scenes. The American secretary of defense is a former television personality with more tattoos than people in a trailer park. He said rules of engagement are stupid because they stop you from "winning" while the US bombed a girl's school.They literally fired the people who calculate things and wage war based on memes, vibes and chatgpt recommendations

tinyhouse: Israel and the US completely control their airspace and Iran's entire navy got demolished. I think the US prefers not to got too far as they prefer to keep the negotiation talks open. According to reports they asked Israel not to target energy for example.

silisili: Whatever points this author was trying to make were completely obliterated by the LLM it was run through or used to generate it.A shame because it seems to have interesting points, but was too wordy and LLMified to keep attention. Stop telling me what it's not every other sentence, and just say what you mean. I wish folks would just use their own words.

fulafel: This is worrying about trivialities. We need to be rapidly phasing out fossils usage to mitigate the climate catastrophe. Which of course requires a much much smaller supply of oil.There should be ~ $250/barrel cost added to the market price to account for externalities (barrel of oil releases 0.43 tons of co2 and avg social cost of carbon from https://arxiv.org/html/2402.09125v3 is $500+/ton)

jiggawatts: Normally what happens in these scenarios is that both sides declare victory and go home to lick their wounds.The US and Israel can claim that they've caused the IRGC sufficient damage to set them back a decade or more.Iran will declare that they've fought off a superpower with minimal real losses, and they can say that despite the best efforts at interference, they chose and kept their preferred leader alive.

robertjpayne: Normally yes, but without regime change the Iranian leadership will have even more resolve than ever to continue weapons programs (nuclear or not) and prepare retaliation for the inevitable next round of bombing…There is no winning here for anyone.

steve_adams_86: This is written a bit like the US dollar depends solely on the price of oil, which isn't true.It also seems like if we're to game theory this, we'd need to plot out the full escalation capacity of the USA, which the author is failing to do here. I don't like the idea of doing that because the thought is sickening, but it's necessary to consider the entire decision tree to make a remotely rational model.In retrospect I guess game theory is used kind of rhetorically here. If you consider what's written through that lens, it's very poorly developed and doesn't make sense. Maybe this is a thing, though? Am I misunderstanding what the author means by game theory here?I do think the asymmetry of war costs are a serious problem for the USA, and the less they're willing to escalate or otherwise mitigate this, the more serious that problem becomes. If I were to make a statement like the author did about the war, I'd frame it more like "this is going to be insanely fucking risky and expensive for the USA", but certainly not that they'll lose.

_heimdall: The stat has been raised frequently of late that 20% of the world's oil floes through the Straight.My understanding is that its 20% of total oil, but that around half of all oil production is used domestically where it is produced and never enters global markets.Unless I missed something when fact checking that, Iran is capable cutting off 40% of all purchasable oil.

perfmode: 75% of Japan’s oil. 60% of India’s oil. 40% of China’s oil. is what i’ve heard.

applfanboysbgon: They were calculated in, but the decision was made by someone who did not give a fuck about the math.

robertjpayne: Maybe the US military commanders, generals and Pentagon knew this but the civilian leadership at the top chose to completely ignore it and can't really articulate a plan or what the plan ever was.

davidw: > There is no way the USEppur si muove.These folks are not our best and brightest.https://www.wsj.com/finance/u-s-plan-to-unblock-strait-of-ho...

notepad0x90: https://polymarket.com/event/will-crude-oil-cl-hit-by-end-of...I wonder how prediction markets are affecting all this.

liuliu: Not really. The U.S. can send in the ground force to restore the trade around the Gulf. The BUT is obvious in this case tho.

robertjpayne: The ground deployment to the mountains on Iran's side of the strait will have to be absolutely insane to actually eliminate the threat (if it's even possible to) of Iran launching drones or suicide boats at tankers.

_heimdall: Trump, the neo-cons, and much of the Republican party might as well hang up their hats if they put boots on the ground (beyond special forces which is often ignored for some reason).The US will be bogged down for years at a minimum if we entered Iran on the ground, or we would lose quickly and tuck tail.This isn't a fight to be won in a conventional war, the administration put every chip they had on a gamble that regime change was possible with air superiority alone. I don't know of any historical example of that working, but I guess we'll see what happens.

davidw: Corporate media in this moment is... not great.Figuring out what takes its place is a hard problem that no one seems to have cracked. I don't know if its replacement will be very profitable, but we all lose out when media isn't working. Having a shared reality is fundamental for a healthy society.

keyle: The irony of drill, baby drill, and removing the environmental restrictions, encouraging the sale of petrol cars... And then causing the prices to be jacked up.2026 I swear..., I'm expected a post on top of HN any day about"i've written all code by hand this month, here is what i learnt".

surgical_fire: > There is no way the US/Israel didn't calculate that:I don't really believe the buffoons in US leadership calculate much. It's all vibes.I firmly believe it will become a case study in how many ways a comically incompetent government can damage a country.As for Israel... I think their calculation is simple. They don't really care about how much damage they cause to the world economy, as long as they get to kill Muslims in general and Iranians in particular. They want death.

BLKNSLVR: I've found it mind boggling for at least a decade (since solar panels started being a relatively normal consumer addition to the home) that a transition to electric and away from fossil fuels hasn't been an, essentially, national security priority for all countries other than those that produce oil.The dependence, of literally almost everything, on the continuous flow of oil from few parts of the world has been an obvious point of strangulation for longer than I've been alive.I mean, I understand that it's so entrenched that politics is owned by it, but, hell, it's been, what a week and a bit, and already Australian media is trying to talk down panic about petrol shortages.The blind leading the blind.

fulafel: Yes indeed.And of course mitigating the climate catastrophe should be much more entrenched, there's vastly more voters whose lives will be impacted by it than by fortunes of the oil business.

YZF: The core of the problem is that the US stepped back under Obama from being the guarantor of global order. The world needs policing and deterrence is the sad reality otherwise everything goes to hell.Why did Russia attack Ukraine? Why is China threatening to attack Taiwan? Without the US (and the west more generally) Russia would retake half of Europe and China would have taken Taiwan. If you think there would be world peace you are so very much mistaken (speaking of propaganda). If you goal is to speak Russian and Chinese and live in those sorts of regimes then that's very much aligned with the US and the West just stepping back and not using force ever.

dangus: These are far too many smart big words for the present situation, which is what's so scary and unpredictable about it.The US government can't even coherently explain what they are looking to get out of the war with Iran. It's just Trump watching too much TV thinking that he can do another Venezuela super easy and the next leader of Iran will magically be on his side now. Now that that hasn't happened, he legitimately doesn't know what to do next.We are getting what we voted for!New wars (Republicans start the vast majority of them)Irresponsible fiscal policy, increased national deficitCutting taxes for the wealthy (of course)Regressive tax increases for the poor (tariffs = higher tax burden for people who spend a higher ratio of income on necessities)I'm sure we'll get another Republican recession, that would be a recession for each of Donald Trump's two terms in office!Higher gas prices, another classic Republican gift to their voters. But also, don't buy an electric car! Those are gay or whatever, you don't want to have blue hair and get passed by a hot Republican girl in a sports car, do you?Next, Democrats will get voted in to clean up the mess (if we even get fair elections this time), and they'll get criticized for being sabotaged by their opponents at every turn and not cleaning up the massive pile of GOP elephant shit fast enough.

Brybry: Al Jazeera, AP News, NYT, etc have been doing "live blogs" every day of the war since it started.CBC does it too. https://www.cbc.ca/news/world/livestory/iran-israel-us-war-d...Though I will say CBC's seems to not include as many individual strike and counterstrike posts as others.

3eb7988a1663: Japan, an island nation with virtually no natural resources of its own, depends on it for a staggering 75% of its oil. Japan’s Prime Minister has warned plainly that if the Strait closes, the entire Japanese economy will collapse within eight to nine months. Not slow down. Not a contract. Collapse. I am failing to an article about this, but that is absolutely incredible if true.

zer00eyz: > There is no way the US/Israel didn't calculate that: ... the straight would be closedIt has always had this potential, as it has happened before: see https://en.wikipedia.org/wiki/Operation_Earnest_Will (1987). But based on this history I would assume that many in the admin did not find the threat as credible as it was then. We dont seem to have a good grasp on how things have gone in the black sea. We clearly did not anticipate the level of drone attacks that have been put out by Iran.Nothing says "we did not have a plan" when easing Russian sanctions while you ask Ukraine for help with defenses.> a new leader may represent similar idiologies of the past leader.I could see making a bet that with the current water crisis there the this would tip them into an "Arab spring" moment. For any one aware of the history there, it was a poor one at best.

YZF: Everyone says there's no historical examples but there is no exact parallel either. I wouldn't argue based on historical precedence here.The challenge is that regime is large and armed and they can hide and weather the storm. They'll hide in hospitals, and mosques, and schools and amongst civilians.Getting them and disrupting their organization to a point where a popular revolt can take over seems ... lessay hard.What needs to happen is that some parts of the military, who are a bit less fanatic, switches sides. The probability of that is very hard to gauge. There are stories of some defecting but hard to know if it's true or not.

applfanboysbgon: I think the article takes a good idea and ruins it with LLM-generated blabbering about nonsense. It basically presented the weakest possible version of the argument, but from a game theory perspective, I think this was an instant game over from before the match started.- Leader assassinated, schoolgirls slaughtered, diplomatic ship sunk and survivors abandoned to drown in violation of international law. New leader is successor of the first, had several members of his family just killed. Any country would demand justice and feel an overwhelming desire for revenge. Throw in religious martyrdom and that's exacerbated 2x.- Iran was betrayed three times. They negotiated in good faith, upheld their deal with Obama, and were then punished for it during Trump 1 for no reason whatsoever. During Trump 2, they negotiated twice more in good faith and were attacked in the middle of negotiations twice. They have absolutely no reason to trust the word of the US at this point, so any kind of peace agreement that depends on good faith is completely off the table.- Iran has also been taught that appeasement does not work. The fact that they de-escalated after the strike on their nuclear facilities was magnanimous. That was a clear act of war, but they bore the transgression and allowed the US to get away with it. They have now learned that the US will unilaterally escalate no matter what they do, that there is no limit to the crimes the US will commit against them, and that backing down only emboldens the US to take more from them and kill more Iranians.- In short, from a game theory perspective, Iran cannot back down from this conflict. If they do, it's an unconditional surrender wherein the US is allowed to kill their leaders, strangle their economy, destroy their ability to defend themselves, and do whatever the fuck they want to Iran without repercussion. A nation cannot remain sovereign if an aggressor is able to kill their leaders at any time on a whim. Even if the US attempts to back out of the conflict, Iran must continue the war in any means possible in such a way as to cause the US to suffer proportionately as Iran has, in order to show consequences to their actions and deter future acts of aggression. This is as classic a prisoner's dilemma as it gets: when faced with an opponent who does not cooperate, you must make things worse for both of you by not cooperating so they will learn to cooperate. Continuing to cooperate against someone who has shown they will always not cooperate is a losing play.- The primary means available to them is to close the Strait of Hormuz. They are doing this, and the US has no countermeasures. Oil is already back above $100/barrel despite the US announcing a $20b re-insurance scheme for vessels traversing the strait and releasing an unprecedented amount of their oil reserves. It will continue rising as the strait remains closed. Together with their attacks on US-aligned Gulf states, this puts significant pressure on US allies in the region, who are now facing an existential threat.- From here, there are three plausible possibilities. US surrenders to Iran, mediated by Gulf states, who must abolish all US bases in their territory and ensure a mind-boggling sum in war reparations. Iran would probably also need security guarantees from international community and lifting of sanctions. From a game theory perspective, this is still the US's best option by far, no point in throwing good money after bad. Obviously, this is never happening; US didn't get here by game theory, will not choose the game theory optimal choice now.- So we have possibility 2: further escalation. The US must escalate further in order to secure the Strait, lest the entire global economy collapse. This will not go smoothly. Iran is a mountain fortress of 90,000,000 people who have been preparing for asymmetric warfare for decades and hate the US with a passion. The US lost Vietnam badly, lost Afghanistan, will lose a guerilla ground war in Iran twice as badly. Maybe by "full escalation capacity of the US" you mean nuking Iran. It is unlikely that Russia, China, or really even their own allies would allow that to fly without some kind of unbelievably extreme repercussion. If you did opt for this choice, you would have to nuke it so thoroughly as to completely wipe it off the map and kill 90,000,000 people given the distributed structure of their resistance optimized for guerilla conflict. In this case, Iran loses, and the US also loses because whatever the fuck happens to the world order after that is not predictable but will not be pleasant.- Possibility 3, is that the US attempts to withdraw, ignores the fact that the Strait is closed, and leaves the world economy to collapse. Trump may plausibly do this as well, because nothing will ever personally affect him or his lifestyle. His base is unfathomably loyal and 80% are always on his side no matter what he does and no matter how much it hurts them. However, this is still an overwhelming loss for the US itself.I think the only possible hope for a "doesn't fuck the world" resolution here is that Iran itself fails the game theory rationality check and allows itself to become a vassal state of the US subjected to random killings any time. They have virtually nothing to lose considering how the status quo is already a loss for them beyond belief. I suspect they will not fail this check, because hundreds of dead schoolgirls and all the other trangressions is a strong motivating factor towards the game theory optimal play even if they're acting on emotion rather than game theory.

YZF: In the sense that someone is manipulating the real world to make money in the prediction markets? Otherwise it's just like options.

YZF: They randomly shoot in all directions but they also managed to hit some things (e.g. the US installation in Kuwait and a US radar) that are probably actual legit targets. But yes, hotels, apartment buildings, (civilian) airports, container ships etc. are high on the list of things hit.

YZF: You'd be surprised that Israeli media has decent coverage of the damage from Iran's attacks to Israel and the gulf. Random e.g.: https://www.timesofisrael.com/at-least-25-iranian-attacks-ha...The CBC hasn't done any good reporting in the last decade that I can tell. They just copy-paste from news agencies based on their ideological principles or something.Another source is: https://understandingwar.org/analysis/middle-east/iran-updat...You can definitely get some color on YouTube. Iran is fighting back but that's not what's going to decide the war (e.g. the damage to Israel or to the Gulf states). They are taking a lot more damage then they're dishing out and the scale of their counters goes down every day. The straits are a very different story since it doesn't take much to threaten the ships to the extent nobody wants to take a chance. One drone, or mine, or a missile, and the straits are closed. Even if the US and Israel are able to pretty much completely suppress Iranian attacks on Israel and the Gulf states the straits might remain closed.

jiggawatts: I'm not claiming either side is actually winning, I'm merely predicting that they'll both claim to have won.On the topic of the weapons program: The Israeli approach is to regularly "mow the lawn" to keep their regional opponents perpetually behind. Iran's nuclear weapons and ICBM programmes have almost certainly been damaged, perhaps enough to delay them for half a decade or more. Then it'll be time to mow the lawn again, or hope that by then a more moderate leadership can sign an agreement with a new US president that's a bit more trustworthy than the current one.

notepad0x90: No, in the sense that he people who set oil prices and government policy alike can trade in those prediction markets. I'm all for the markets, very democratic and libertarian (not that I'm one), but policy makers, executives and other people from whom a conflict of interest by a prediction market translates into disaster for real people should be restricted from participating in these markets.

YZF: OK. So I think your answer is actually a yes?In this case however you can pretty much do the same thing with other financial instruments like future contract on oil. Either way, I agree decision makers shouldn't be allowed to trade (and I think are forbidden in most countries).

AnthonyMouse: There are several issues with that math.To begin with, it assumes that oil currently used domestically isn't on the market, but what do you expect oil producers to do if foreign buyers make a higher bid for the "domestic" oil? Or to put it another way, there's a reason the market price goes up by essentially the same amount in the oil-producing countries as everywhere else.Then it assumes that oil that currently goes through the Strait has to. Oil can also leave the middle east by going west, e.g. to Europe. You might think that doesn't help India or China, but it's still a global commodity with a global price. India and China could then buy oil from Russia, or whatever other country that Europe had been buying from and now isn't because they're getting more oil from the middle east.Does this still raise the price? Yes it does, because there is a reason they were doing it the other way previously -- doing something else will have higher transportation costs. But does it mean 20% of global oil supplies will be cut off? Not really, it mostly means you'll have to increase the average distance it gets transported and pay a few percent more for higher transportation costs.

jcranmer: > There is no way the US/Israel didn't calculate that - the straight would be closed, a new leader may represent similar idiologies of the past leader.A few things to remember here. First, Israel and US have divergent strategic goals. (Well, that presumes the US has strategic goals, which appears to be false given the struggle the administration has had over the past week to explain why the fuck we're at war with Iran.) Israel's apparent goal is the complete destruction of the Iranian state, and Netanyahu certainly seems to believe that Israel will suffer no consequences as a result.The second is that Trump has never faced any consequences for his actions. If anything goes wrong, he just lies and says that it's all right, changes the topic and since no one talks about anymore, hey, it's been fixed. It also seems as if he believes that nobody else truly has agency, so the idea that the enemy gets a vote in war may truly be foreign to him.Note also the quality of people that Trump has surrounded himself with in this term. The head of the military is someone who washed out of the military officer corps (and also essentially failed in every managerial career he's had since them). They openly denigrate the importance of things like logistics in military, in favor of big, manly things like the awesome power of their missile salvos. I believe Hegseth legitimately doesn't give a crap about the boring things like naval escort missions because that's not manly, and instead cares more about how much big kaboom has been delivered to Iran, and so far the evidence of how the operation has gone to doubt completely vindicates that belief.Fourth, even almost two weeks into the strait being closed, the US military has done nothing to reopen it. The strait is not closed because of the existence of mines, or because Iran is targeting ships; it is closed because shippers are absolutely terrified to send their ships through it. Reopening it thus requires giving those people confidence to send their ships through it, and that confidence of course requires clear, public statements. That is not happening. Instead, we get Trump giving off a different explanation of how to reopen it everytime he's asked, followed up by the US Navy denying whatever Trump said (e.g., the US Navy is unwilling to provide any naval escort). There is insufficient materiel in the theater right now to reopen the strait, and nothing is being shipped to the strait that can reopen it. From all apparent evidence, the current plan for reopening the strait is praying that it reopens tomorrow, although I have doubts that there is enough self-awareness or religiosity to actually do any praying here.The risk of Iran closing the Strait of Hormuz is so obvious, the catastrophe of such an action is so well-known, that you would have to be a colossal idiot to go into a situation where Iran might plausibly close the strait without a plan to reopen it swiftly. And yet all available evidence leans in that direction. So now many, many people are forced to countenance the sobering idea that the US government is led by an idiot who will destroy the economy without realizing that's what he's doing. It's time for us to wake up to the fact that there are no adults in the US government anymore and do something about that.

za3faran: I think you give too much credit to the US and zionists. They probably convinced Trump that it would be another Venezuela, and because of their hubris they decided to go for it anyway. Remember how at the beginning it was supposed to only last for 2-3 days? Then 1 week, then 2 weeks, then 4 weeks, then until September. They clearly didn't see this far.

YZF: Wars are hard to predict and the economy is hard to predict. There's easy money in the making for those who are sure the oil price is going to continue way up.The blog you reference has inaccuracies. Drones are generally not shot by THAAD is a glaring one. It's very much not 2-3 million dollars to $50k. Helicopter gunships shoot down drones with bullets these days is very common and there are other economic means of bringing them down.Most of the heavy lifting in suppressing these attacks is done by other drones patrolling the skies and attacking anything that tries to fire. Those also don't use extremely expensive munitions."Iran produces approximately 500 of these drones per day and holds a stockpile estimated at around 80,000 units.". Both these are false today. I'd also question if they were true when Iran was attacked. These figures don't pass the smell test and either way any stockpile is an instant target.Everyone seems to be an expert today.It's obviously not great that the Hormuz straits are more or less closed. We've seen in Yemen that a ragtag force can be massively attacked and still manage to fire at ships on a much larger body of water. That said we didn't really see if they can sustain it for months under heavy attack which is a possible premise here.There are some pipelines bypassing the straits but their capacity is much smaller. It's also about 20% of the world supply so definitely other suppliers can make up for some of the loss at a cost.I'm not an expert. But the current oil price reflects what the experts think best. And that price is still below what it was for about half of 2022. And fluctuating. What will matter is the price over months.

msy: Absolutely agree there's both some dubious suppositions and hand-waving there. The real question is I suspect how much pressure the GCC can withstand and how much pressure they can apply to Trump directly given business ties etc. If they lose a serious chunk of desalination capacity for example the situation becomes dire extremely quickly. For Dubai simply not having a decent supply of fresh food would alone be an economic catastrophe, every day this drags on is doing reputational damage that'll take years to fully recover from long after the hotel facades are patched up.

siliconc0w: It's going higher, there is no viable TACO here and they can keep the strait shut indefinitely.Plus the longer it goes, the harder it is to bring back up production or refining capacity.

csomar: That's more like unregulated options market than a prediction market.