As the largest oil companies in the world are government-owned, oil is very political. This war in Ukraine has obviously spooked energy markets, and that has had spillover effects into the stock market. John Mearsheimer, who has been correct in most strategic matters involving use of force, particularly pertaining to Ukraine, believes that Russia is serious about NATO posing an existential threat to itself, and thus will go to extreme lengths to ameliorate this threat, making comparisons to US firebombing campaigns over Japan which caused hundreds of thousands of civilian casualties in WWII. He believes Russia will not stop until Ukraine is reduced to rubble.
If the above prediction comes to pass, it will likely have consequences that will take several years if not decades to play out. As Russia is a major hydrocarbon producer, this will result in a significant supply disruption to most NATO countries for the foreseeable future, which will likely lead to elevated oil prices in the foreseeable future.
The inability of the U.S. to enforce its Budapest commitments will also echo in allied capitals that rely on America’s military assurances. Don’t be surprised if Japan or South Korea seek their own nuclear deterrent. If Americans want to know why they should care about Ukraine, nuclear proliferation is one reason. Betrayal has consequences, as the world seems destined to learn again the hard way.
The last time a geopolitical event spooked oil markets was the US invasion of Iraq. Oil spiked from $20 to $140 during the occupation, with the only thing causing oil to fall was the 2008 financial crisis. Before that, there was the oil embargo during the 70s, which also resulted in a decade-long elevation in oil prices. Both the 2000s and the 70s saw a severe, decade-long contraction in the stock market from previous highs.
This particular geopolitical event (according to video above) is the worst Europe has seen since WWII. Caveat emptor, plan accordingly.
Submitted March 14, 2022 at 01:29AM by CQME https://ift.tt/d1oUh63
