The intertwined fates of geopolitics and oil are like a drama-laden soap opera, except in this series, the stakes are sky-high and affect the global economy. The recent escalation of the Gaza-Israel conflict and its potential repercussions on the oil industry paint a vivid example of this intricate relationship. While the death toll tragically rises on both sides of the Gaza-Israel divide, whispers of an oil embargo are gaining momentum in the corridors of international finance and politics.
As of now, the conflict has claimed over 1,300 lives in Gaza and at least 900 in Israel. U.N. Secretary General Antonio Guterres marks the situation as hitting a “dangerous new low,” and that might be putting it mildly. In such an atmosphere, everything, from the peace talks to the flow of oil, becomes volatile.
At the heart of the speculation is the upcoming OPEC meeting in Vienna on November 26, 2023. It’s a gathering that brings together some of the world’s biggest oil producers. Analysts are predicting that OPEC+ will likely continue its current output policies, which aim to tightly manage the market through the final quarter of 2023 and into the next year. But the cloud of the Gaza-Israel conflict looms large over these discussions, throwing in a wildcard that could affect global oil prices.
This isn’t just theoretical musings. Saudi Arabia and Russia, two behemoths of oil exports, are already in talks about the market and prices amid this escalating conflict. While neither has explicitly mentioned an oil embargo, their mere discussion carries a particular weight given historical precedents.
Speaking of history, the term ‘oil embargo’ might conjure images of the 1973 crisis. That embargo led by Saudi Arabia aimed to target nations supporting Israel during the Yom Kippur War. The crisis had a crippling effect on the economies of the affected nations, particularly the United States, and led to a seismic shift in global geopolitics. There’s always the possibility that history could repeat itself, but the geopolitics surrounding oil embargoes is far more nuanced today.
For one, the efficacy of oil embargoes is up for debate. Traditionally, they’ve been a bit like a water pistol in a duel; they make a splash but don’t always hit the mark. That’s largely because the targeted nations often find alternative sources of oil. It’s also why the United States, among other countries, has imposed its fair share of embargoes throughout history—against Japan before World War II, against the Soviet Union in the 1960s, and against South Africa, to name a few.
Moreover, embargoes are often seen less as straightforward commercial strategies and more as a form of political blackmail. They aim to push the targeted nations into a corner to compel specific actions. So, while OPEC might not have given any official nod towards an embargo related to the current Gaza-Israel situation, the tools are there, lying tantalisingly within reach should they choose to pick them up.
To wrap it up, while the conversation on oil embargoes bubbles away in the cauldron of international relations, it’s essential to remember that these are complex decisions. Factors ranging from geopolitics to market conditions, and even the specific stances of OPEC member nations, would weigh in on such a monumental move. And in a world increasingly defined by unpredictability, the only sure thing is that the global audience will be waiting, popcorn in hand, for the next episode in this ongoing saga.
