Persian Gulf Conflict Could Send Solar Beyond 10TW

[Meredith Poor + 894]

A Middle East conflict that choked off oil supply (sending oil prices presumably to $325) would put renewable technologies in clover. This would trigger an enormous build out. The world’s largest single solar power project with a capacity of 1,117 MW – has started commercial operation in the U.A.E. Typical nuclear plants are 1GW, so solar is now being developed on a similar scale.

There have been vast efforts at developing energy alternatives, with as many motivations as there are researchers. Some governments want it for 'energy independence', some want it for 'clean energy', some want it to power spy satellites, and some just want to sell projects to create jobs and generate profits. 'Armies' of companies and workers are now competent producers, distributors, and installers.

This means in particular generating hydrocarbons from CO2 and hydrogen. As pointed out elsewhere, the current cost of doing this is somewhere between $60 and $90 a barrel.

I can see $325 occurring for about 1 minute on the commodities markets before it collapses.

[Jan van Eck + 7,558]

Will conflict in the Middle East result in efforts by the belligerents to close the Strait of Hormuz?   Judging by past wars, the answer would be "yes."  The slugfest between Egypt and Israel resulted in a number of ships sunk in the Suez Canal, with the two armies in a stand-off on opposite banks, and the Canal remained closed for at least a year.   The Straits, in contrast, are much wider than the Canal, although the use of mines would greatly discourage attempts to sail through. 

I predict two developments:  first, the ship insurers will become reluctant to "write" the policies, and those that do, will be tacking on a hefty war premium.  There is an old saying in insurance:  "there is no risk too large; there are only premiums that are too small."   OK, that was Maurice Greenberg over at AIG and he would write anything, just for the premiums  (and if the insurer were to get into the re-insurance market, that risk would be greatly lessened, and those policies would get written, but that assumes that the reinsurance giants Swiss Re and Zurich Re are prepared to accept policies on war-transit policies).  

The second development is that this does not "cut off" oil supplies.  What it does is create a bonanza for oil from outside the Persian Gulf, and their prices that are not locked in by contract will go through the roof - granting them huge premiums.  Those countries will go nuts in the pumping and refining departments, so the actual "hit" to the supply will b e a lot less than you might think.  You will see a war spike, but it will not result in an elevated pricing into the future. 

Depending on how fast the US Navy reacts with minesweepers, and how spectacularly the belligerents, presumably the Iranian Revolutionary Guards, respond with their mini-boats, that Strait could be impassable except for the really daring. But will oil get through?  Sure it will.  Oil is like that; it always ends up getting loaded, even under very difficult circumstances. (The mini-boats are quite small flying hulls, machines that will support two men plus a machine gun or bomb or mine, that ride in ground-effect just a few feet over the surface, quite fast, can do 125 mph.) 

  

The Iranians in particular have been mass-producing these little machines, originally a Russian design, and so the adversary is faced with this three-dimensional attack swarm which makes thing seriously hairy.  The machine cannot fly in the conventional sense, but can trade speed for altitude, so it can "hop" or jump up as much as 1,000 feet and then dive back down.  Send several hundred at a target ship and I see no realistic defense.  The Iranians specifically developed these in order to sink a US aircraft carrier  (another reason those big carriers stay well out to sea!). 

It is not in the Iranian's interests to actually sink anything, except perhaps for symbolic victory.  Their oil ships must pass through the Straits, and they will, albeit with either disguised cargos or disguised flag. Their interest is in inflicting economic pain on the West, by disrupting insurance markets. And these little mosquitos can do that nicely. 

What a conflict will do is push international oil companies to go back to exploring and drilling.  In particular I see the oil deposits off Guyana being drilled, and Canada getting back into the game.  Also I see the new fields found up on the North Slope of Alaska rapidly coming on-line.  There is a lot of oil out there.   Solar panels?  That will continue to be a slow mover, compared to oil. 

[Old-Ruffneck + 1,238]

2 hours ago, Meredith Poor said:

A Middle East conflict that choked off oil supply (sending oil prices presumably to $325)

The writer of that story is full of bunk, too many if's, ands, and conjecture, and speculative guessing. Personally I don't see a conflict other than some Iranian infrastructure getting demolished. The Israelis would more than enjoy taking out all nuclear facilities. Would that start a war in middle east,......nope. US has too many warships ready to strategically take out Iranian Air and Ground. 

[BenFranklin'sSpectacles + 762]

On 7/8/2019 at 8:59 AM, Old-Ruffneck said:

The writer of that story is full of bunk, too many if's, ands, and conjecture, and speculative guessing. Personally I don't see a conflict other than some Iranian infrastructure getting demolished. The Israelis would more than enjoy taking out all nuclear facilities. Would that start a war in middle east,......nope. US has too many warships ready to strategically take out Iranian Air and Ground. 

Consider that the US strategic bomber fleet can service thousands of targets in a single sortie.  Iranian infrastructure wouldn't last long.