A member of the Free Syrian Army holds a burning portrait of embattled Syrian President Bashar al-Assad in Al-Qsair on January 25, 2012. Photo: A. Romenzi/AFP/Getty
By Mich Massaad, Beating The Index
I still remember quite well the oil shock we witnessed in 2008; oil hit a record of $147 per barrel and quickly tumbled back down as the economy collapsed. The way events are moving these days, chances are we are about to witness a larger oil shock thanks to President Obama being hell bent on hitting the Syrian regime.
The Background
The war in Syria has been going on for the last 2 years between the government and the so called “free Syrian army”. This is a rag tag group of warlords loosely associated with Al Qaeda and not “freedom loving fighters”.
The rebels are supported by Saudi Arabia, Qatar, Turkey and to my horror a host of western countries like the US, France and the UK. A couple of weeks ago, Sarin gas was deployed in Syria resulting in the death of more than 1400 people. The “Red line” set by Obama against the use of chemical weapons has been crossed!
The Problem
The US wants to punish the regime by launching military strikes in order to weaken the Syrian army units and level the playing field with the rebels. The problem is no one knows if the regime launched the chemical attack or not. The Iraqi WMD scenario comes back to mind!
I don’t believe the regime is stupid enough to use chemical weapons after tipping the balance in its favor. The Syrian army is gaining one victory after another on the ground. It makes more sense for the rebels to launch a chemical rocket (courtesy of supporting Arab states) knowing full well what will happen if the regime gets blamed for it.
Let’s be clear on one thing here, the regime is no saint or model for human rights. But I personally find Assad’s SECULAR dictatorship 1,000 times better than the human liver-eating Al Qaeda religious nuts.
Why punish a regime that has been doing humanity a favor by attracting all the trash in the world and burning it? Arab countries like Saudi Arabia have even been sending their islamo-fascist prisoners to fight and die in Syria in the name of holy war – aka jihad.
The Madness
A military strike on Syria is madness; it’s a recipe for disaster. Not because Syria is a superpower that’s able to stand up to the US. On the contrary, the Syrian army has been weakened following months of street fighting. It doesn’t stand a chance in such a confrontation.
Even with the support of its allies, Iran and the Lebanon based Shiite Hizbullah group, the US would obviously still win the war. But here’s the thing, Syria is largely destroyed, they don’t have much left to lose. If the US decides to hit them hard, what stops Syria or its ally Iran from firing thousands of long range rockets into the eastern oilfields of Saudi Arabia? Why not cause maximum damage to all your enemies if you’re going down?
Oil fields right across Iran: Like Shooting Fish in a Barrel!
There’s a reason why the Middle East is a powder keg and Obama seems to be moving ahead with his plans for a strike regardless of the outcome. The price of oil will set one new record after another if the Axis retaliates by hitting Saudi Arabia (10M+ bopd of production) and blocking the Strait of Hormuz (2.3M+ bopd in transit).
Of course let’s not forget thousands of missiles will rain on Israel from multiple sources causing useless death and destruction all around. And speaking of Israel, where is Israel’s interest in having Al Qaeda hordes camping on its border if the regime collapses?
Iran is not Iraq; besides the difference of one letter at the end, Iran is an ideological state that will put up one hell of a fight before it goes down. Russia is also there to provide the Axis with logistical and technical support in the background.
Unless Obama backs down or decides to launch a few Tomahawks into the desert to save face, get ready to see oil over $200 in my opinion.Even if the war ends in a few days, the damage to Saudi Arabia’s oil fields might take a few million barrels of oil offline. This could be for a significant amount of time with no one else to make up the deficit leaving oil prices SKY HIGH! Of course, you know what comes after that: The global economy would collapse and it would be worse than 2008. Talk about the potential of a new “Great Recession” in the cards.
Why is Obama taking the risk of triggering global economic collapse? To support a bunch of Al Qaeda affiliates in Syria? What stops these Jihadists from showing up in Europe soon after the regime is destroyed? As far as I know Europe is a land full of infidels!
The US decision to go to war against Iraq was a major mistake. It resulted in the death of thousands, the quasi-extinction of minority groups and putting Iraq under the influence of Iran not to forget wasting more than $2 TRILLION.
Going to war against Syria might have a much worse outcome even with no boots on the ground. On top of the useless death and destruction, people all over the world might have to relive a “great recession” yet again in less than a decade. In the near term, brace yourselves for spiking oil prices and a lot of uncertainty which the market hates!
What do you think will happen?
Mich, while I agree the US shouldn’t invade Syria $200 for a barrel of oil seems high. As you mentioned the high for Oil was $147 pre-2008 when the world economy was at its peak and demand was high. The world economy is just starting to recover and with the advent of fracking in North America there are now huge reserves available to create supply.
John, what happens if you take 5 million bopd offline for an extended period of time? That is the question.
Global production is at 85M barrels per day. Oil is trading at Approx $110. From a very fundamental standpoint a decrease of 5M barrels is a 5% decrease in supply hardly enough to push prices 80% higher from $110-200. I would say the only stimulus for that kind of growth would come from demand from the global economy going full tilt (pre 2008 levels) or supply being drastically reduced from an old school OPEC boycott or Peak Oil.