By Grace Achum and Nduka Uzuakpundu
There is some informed optimism that, in spite of the outbreak of conflict between Israel and the Hamas group, in the Gaza Strip, the price of crude oil in the international market would remain fairly affordable; not rising beyond $90 per barrel that it was within one week after the surprise Saturday, October 7, morning attack by Hamas against a gathering of Israelis attending a musical festival. At some spot markets, in the Middle East and the European Union, there were reports of crude oil, especially Brent, selling, briefly, for above $120. Many thanks to panic buying.
The prevailing bearish trend, since then, could well be explained by the obvious fact that in the Israel-Hamas conflict – one in a series, since the Palestinian intifada in 2000 – both warring parties are no major players in the oil economy and politics of the Middle East, as they, naturally, have no influential roles in the global petroleum industry.
In fine, both Hamas and Israel are no cousins or neighbours, still less, members of the dominant oil cartel – the Organization of Petroleum Exporting Countries (OPEC), which dictates the supply and price of global oil. Besides, in spite of its ill-advised – if senseless – attack against the Jewish State of Israel, regional and global response – take that of the United States of America, Britain, Germany and Turkey, and some conservative, oil-rich sheikhdoms, like Qatar and Saudi Arabia – has been to contain any plan, considered mischievous and propagandist to give the crisis a complexion of an Arab-Israeli war – possibly to induce an astronomical soar in the per-barrel price of crude oil.
The Hamas aggression was senseless, in that it did not reflect a touch of a calculated risk with a possibility to mitigate the instant humanitarian crisis, just in case, as it’s clear, in the event of Israeli air strikes. This is clearly a bad press for Hamas. You may argue that the Hamas attack was calculated to draw global attention to the sorry plight of Palestinians in Gaza, under choking control by Israel.
Still, not many countries – including the conservative, oil-abundant, Arab sheikhdoms, that dominate OPEC – are criticizing Israel for her ambitious blitzkrieg on Gaza, even though it’s obvious that a majority of Hamas’ operatives, who triggered off the crisis, have long melted – almost imperceptibly – out of the overcrowded strip.
The situation, therefore, appears to favour Tel Aviv, in that some of the leading countries of the Arabian Gulf – Saudi Arabia, Qatar, Bahrain and the United Arab Emirates – not so long ago, established diplomatic ties with Israel; their former arch-enemy that was much condemned for occupying Arab territories to the displacement of Palestinians; to reflect a change in the geopolitics of the once volatile Middle East.
To some extent, the Hamas-Israel clash has flashed back the ugly memories of the 1973 oil crisis. The crisis, then, was an upshot of the October War, when Egypt and Syria launched a surprise attack on Israel, in their frantic bid to regain some Arab territories, like the West Bank of the river Jordan, under Israeli occupation.
“In response to the U.S. support for Israel, during the 1973 conflict, Arab oil-producing countries cut oil production, placed embargoes on the U.S. and some of her Nato allies, causing oil prices to quadruple over the following months. It generated ill-feelings in most oil-consuming nations.”
Richard Nixon, who was the president of the United States, then, was visibly angry that he prophesied that a day shall come when the OPEC countries shall quaff their oil!
Washington, which has sent its largest warship, the USS Iowa to the Mediterranean – and it allies in the European Union, while bent on pressing the security of Israel, are also interested in making it clear that the conflict is a regional one; confined to the east Mediterranean – not affecting or drawing any of the OPEC countries to yes, speak or act in defence of the helpless Palestinians in the open and dehumanizing prison that Gaza is.
Although Israel has, for security reason, shutdown her Chevron oil station in the Mediterranean, her oil needs is openly domestic. She’s unlikely, for as long as the campaign against Hamas lasts, be in a dire need for petrol for local consumption and industrial needs, as to affect the price of the commodity in the Middle East and neighbouring European and Asian countries. Attempts by OPEC, Washington and Brussels to prevent the price of crude oil from an astronomical soar possibly to nearly $150, as was the case as about 2003 and 2005 – are decidedly ambitious and a tacit plan to help matters in the crisis.
As some analysts have argued, behind Washington’s and Brussels’ support for Israel is a reminder to the rest of the world that no country, however prosperous, can afford the string of recessions, since 2008, during the Obama administration and the unhealthy effects of the Covid-19 on global economy.
It’s been argued by some oil analysts, that this is the time that top players in global economy and petroleum politics should do whatever they could to shield oil commerce from the vagaries of war in the Middle East. It’s time, in their view, never to allow whatever growth that global economy has made, in the post-Covid-19 period, to be harmed by any form of regional crisis in the oil-blest Middle East.
The initial soar to $90 from $83 per barrel, within one week of the Hamas-Israel conflict, said Patrick De Haan, an oil analyst with GasBuddy, was a natural reaction by crude oil, because it hates conflict; just as it does not like naked flame. The humanitarian toll of the Hamas-Israel crisis has triggered a call, chiefly by a dismayed Antonio Guterres, the United Nations secretary-general, for petrol – and other relief materials, like cooking oil, water, food, medicine, shelter, blankets, energy-giving biscuits, etc. – to be shipped into Gaza.
While it’s just natural to meet the humanitarian needs of the Palestinians in Gaza, that, in itself, would not, necessarily, have a disturbing effect on the price of crude oil in the international market. What surely would – and it’s far from certain – is if the Iran-allied, Lebanon-based Hezbollah group intervenes beyond an earlier flash of some missiles into Israel.
The price crude oil could soar if a peeved Iran, which is sympathetic to the cause of the Palestinians, to have a virile, viable and independent state of their own, blocks the strategically important Strait of Hormuz. Five of the ten major oil producers – Kuwait, Saudi Arabia, Iran, Iraq and the United Arab Emirates – use the waterway, which connects the Persian Gulf to the Arabian Sea to move about 20 percent (one-fifth) of the world’s crude oil supply.
While more than 1,300 Palestinians have been killed in the conflict, 12,000 people – including women and children rendered homeless – the Rafah gate, near Egypt, crowded by Palestinian refugees, the Israel Prime Minister, Benjamin Netanyahu, backed by a war cabinet comprising other political parties, said that Gaza must be made too dry, so that, never again, shall Hamas be augmented, still less cross Israel.
In effect, Tel Aviv is set for a long, sustained occupation of Gaza. Hamas network of tunnels would be destroyed. Israelis and other foreigners – Americans, Britons, Canadians, Australians and Germans – taken hostage by Hamas, would have to be freed. Hamas must pay dearly, Netanyahu has resolved, for more than 300 Israelis deaths.
The destruction in Gaza, three weeks into Israeli blitzkrieg, is such that reconstruction of the strip, by the World Bank’s estimate, would cost $280billion over a period of twelve years.
For the international oil market, nearly 1.3 percent of that post-bellum reconstruction budget would trickle into the treasury of the oil companies or states, that would supply oil to the strip. The forecast, for the next ninety days, by which time Israeli blitzkrieg would have given way to land occupation and mop-up operation, is that oil price in the Mediterranean, continental Europe and the Far East would have plummeted to $65 per barrel. It’s doubtful if the European winter period, that the forecast spans, would take it beyond $83.75, that it was pre-October 7.
