The choices we make in life define the paths we follow. Simple enough. The problem is that sometimes the alternatives offered give us the opportunity to do the right thing or to do the thing that most benefits us. Clearly, that choice is about acting nobly or acting selfishly. For most of us, the consequences of these choices are minimal, but when the choice-making comes on a large scale, the consequences can be global in scope. Take China, for example, and its role in the current Iranian embargo issue. It is Iran’s largest trading partner and the largest consumer of Iranian oil by far.
The recent reports from China indicate its economy is slowing from the government’s plan to curb inflation, which is good, but here is the rub. Oil is a big element in China’s inflation, and it now has an opportunity to squeeze Iran in price. In other words, China can do the right thing for the global community and participate in the Iranian oil embargo, or it can help itself with much needed lower oil prices, as it buys oil from a desperate Iran.
If Iran is to endure sanctions without severe pain, it would need China to keep buying its oil and even increase its purchases to make up for lost sales to Europe. But China has been playing hardball with Iran, seeking steep discounts for oil, cutting its purchases this year by more than half and securing alternative supplies from Russia and Saudi Arabia.
It appears China is choosing to both participate in the global attempt to stop Iran from obtaining nuclear weapons and to help itself with lower oil prices. Not a bad position to be in, if the choices allow for such nuanced behavior.
As to the market and this whole Iranian oil embargo, it looks as if the world is figuring how to do this without driving the price of oil through the roof. It looks as if the world will stand united on this, a feat not often seen in the annals of recent history.
In an analysis ominous for Tehran, the IEA also said there was enough oil supply worldwide to prevent a price shock if Iran is blockaded this year.
This means the oil powers of the world are making choices that benefit the larger community rather than simply feathering their own nests. Both Saudi Arabia and Russia could take advantage of this situation, but it appears they are not. This is good for the global economy, and the world, as it means the US led sanctions can go forward with even more biting power.
That makes it easier for Washington to impose harsh sanctions envisioned under a new law which requires President Barack Obama to assess the impact on energy markets before pressing ahead with its most draconian measures.
If this plays out as I have outlined here, the spike in oil prices I envisioned a few weeks back may not materialize, and if that becomes the case, the U.S. and global economies will not suffer the shock of precious consumer money moving from discretionary spending to spending on gasoline. This will give further impetus to the market, as it looks for every which way it can to go up. Yes, sometimes, even when lots is on the line, we humans can make the right choice, the noble choice, the choice that is in the best interest of all, not just our individual selves.
Trade in the day – Invest in your life …
