I apologize about the double header, but it is the holiday week and I know none of you are actually doing any work anyway so you have plenty of time to listen to our conclusion to the mystery of the magical Christmas rally of 2023.
“China has its route to Europe on the Silk Road Economic Belt through Iran and Turkey but their Maritime Silk Road Initiative goes through the Red Sea and Bab al-Mandab Strait separating Djibouti and Yemen. China can’t appear involved, but Iran is already being sanctioned by the US, so it outsources its planning to Iran and Iran works with terrorists to help terrorists do what they do best.”
An old scribe C Thomas Printer wrote that on Oct. 11, 2023 just 4 days after the terrorist attack on Israel by Hamas. He mentioned that the pawns have been rolled out. He continued “According to a piece in the WSJ, building on peace deals with Egypt and Jordan, expanding Israeli ties with Gulf Arab states could create a chain of American allies linking three key choke points of global trade—the Suez Canal, the Strait of Hormuz, and the Bab Al Mandeb connecting the Red Sea to the Arabian Sea, said Hussein Ibish, senior resident scholar at the Arab Gulf States Institute in Washington.
“That’s very bad news for Iran,” Ibish said.” Yeah, yeah its a douche move to quote your own work just like talking about yourself in the third person, but this context is needed. This is an incredibly important news week and we are having to do a double episode this week. The holidays are supposed to be quiet and no one is paying attention, well I am and there are bombshells being dropped and not just in the Middle East, but about the Middle East. Now do I know China is behind any of this no, but I know Iran is and their vitriol began one day after signing a 25 year pact with China in March of 2021. China also told Biden in the newly cleaned up San Francisco recently that they would reacquire Taiwan by “all means necessary”. Will that mean using their global pawns? Of course.
Iran is now threatening to close the Mediterranean Sea according to the Hill’s Nick Roberston. “They shall soon await the closure of the Mediterranean Sea, [the Strait of] Gibraltar and other waterways,” state media Tasnim quoted Iranian Brig. Gen. Mohammad Reza Naqdi as saying.
Iran has accused the Israeli military, and the U.S. as its close ally, of committing war crimes in Gaza. More than 20,000 Palestinians have died in the conflict since early October, according to the Gaza Health Ministry. That might be a bit of bluster, but the Persian Gulf access and the Straight of Hormuz are key energy shipping lanes and they are also likely on the radar for Iran and they can interfere in this region.
The Bab al-Mandeb strait is being avoided now by a large amount of shipping concerns out of safety and skyrocketing insurance costs due to the Houthis bombing and missile campaigns which are openly backed by Iran. In fact, the Teller Report is reporting that the Port of Eilat near Aqaba is seeing reductions of 85% in volume. This is literally the artery that the alternative Maritime Silk Road would go through, extending up into Israel and going through the Gaza Strip. This is Israel’s Ben Gurion straight map. I’m attaching a link from newarab.com where Sarah Khalil describes the region’s importance to shipping. This proposal dates back to the 1960’s. This would be an alternative to the Suez Canal and is vital to Israel shipping independence.
Now you are probably saying, thanks C Thomas for the fine book report, but this doesn’t seem quite worthy of a second pod on this Holiday week. We have been surmising that something happened to scare Biden, Yellen, and Powell. It happened a couple months ago, and things have been weird ever since. Powell has hinted pivot, Yellen probably intervened in the Treasury Market, oil has dropped like a rock, and the B&B boys of Biden and Blinken seemed to be giving the Middle East a full court press.
Let me tell you what else dropped on Saturday from the Wall Street Journal and the great reporting from Vivian Salama, Dion Nissenbaum, and Benoit Faucon. At 6:30am on October 7th the US became aware of Israeli plans to pre-emptively strike Hezbollah in Lebanon to the north away from Gaza. Israeli Intelligence warned of a massive border crossing, but the US intelligence deemed the intelligence unreliable according to the report. This would blow the lid off this powder keg. Israeli warplanes were awaiting orders from Israeli Prime Minister Benjamin Netanyahu when the US diplomatic team went to work. They write “Biden’s top intelligence, military and national-security advisers—including CIA Director William Burns and Director of National Intelligence Avril Haines, Secretary of State Antony Blinken, Defense Secretary Lloyd Austin and Chairman of the Joint Chiefs CQ Brown—convened later that morning for a principal’s committee meeting, chaired by National Security Adviser Jake Sullivan, to discuss Israel’s proposed plans and determined that U.S. intelligence didn’t correspond with Israel’s.” 6 hours of back-and-forth phone calls were needed to get the Israelis to back down. The planes were on the tarmac, this is like a movie. We talked about bringing the pawns out, it seems that the US and Israel had a chance to exchange rooks with Iran and didn’t take it. When we discussed our timelines last week, we mentioned that the B&B boys started in the middle of October and that they were meeting with Israel about something with Israel, who we knew to be mad as a hornet. They were trying to stop Israel from amplifying the conflict. If Israel goes after Hezbollah into Lebanon, then it probably officially brings in Iran and then everything blows up. The oil price which was finally dropping would have reversed and probably would have assumed Ukraine invasion levels around $120 a barrel if Iran responds with closing the Persian Gulf and the Red Sea. Now they could have tried to close it for a while, but remember our carriers and destroyers were heading to the region. Brent Johnson of Santiago Capital and the dollar milkshake theorist that we have discussed in the past says and I’m paraphrasing, the dollar isn’t backed by the full faith and credit of the US but by the military and in particular the Navy to secure the shipping lanes of commerce around the world. Remember, this is when we were having trouble selling debt so any show of weakness in our military would have exacerbated the US treasury weakness.
These authors continue, “The U.S. role in stopping Israel from carrying out a massive attack on Hezbollah in October shows the critical role diplomacy has played in preventing the conflict from metastasizing into a larger regional war.” So this was printed on Dec 23. It’s been two months since the US talked Israel out of a knee jerk response out of anger. So what has happened? Israel has bombed the holy hell out of Gaza and killed about 20,000 people according to the BBC’s Merlyn Thomas. Bombing crowded population centers like Gaza usually results in about 90% civilian casualties. That’s about 18,000 civilian casualties with women and children about 14,000 of those. Remember this only counts confirmed bodies as there are many more buried in the rubble of 29,000 bombs that Israel has launched. I believe this has escalated despite the B&B boys. The Houthis and their missile attacks and the avoidance of using the Red Sea. Yes, this is going the wrong direction, in fact on Sunday Dec 24th Al- Monitor twitter reports “Netanyahu rebuffs US pressure, says Israel “intensifying’ Gaza war.”
The problem is that this is escalating, from Zero Hedge and Joyce Karam’s twitter account, the Sr news Editor for AlMonitor, “On multiple fronts, we are seeing serious maritime escalation from Gaza- Indian Ocean: new, Red Sea: Houthis, Gulf Waters: Iran and Houthis, and Mediterranean: Iraqi militias. US presence already stretched in region, maritime traffic disrupted.” This was from Saturday the 23rd. Today on the 26, we have reports the Us has bombed Iraq and we have reports that Israel bombed Syria killing a high commander in Iranian army. This is escalating and will get more details in the future.
So what does all of this mean? The smoldering fire of the Middle East is threatening to break out and ruin shipping lanes, US maritime supremacy, and unleash the price of oil higher. Despite the US interventions, Israel is escalating their war as the Washington Post reports on Sunday “experts say the civilian population is now close to famine. People in Gaza “are not pieces on a checkerboard,” Thomas White, a senior U.N. official in Gaza, wrote Saturday on X, formerly Twitter. “The Israeli Army just orders people to move into areas where there are ongoing airstrikes. No place is safe, nowhere to go.”
I’d have to say that in the court of public opinion that Israel is not winning. I also think that the US is not happy with the trajectory that Israel has taken here. I also know that Europe is not backing American’s play in this maritime relief rally of shipping lanes and I know for a fact, that young Americans are somehow siding with Palestine in droves and causing chaos on college campuses regarding an area that I doubt 1 in 4 could find on a map. Such are the protesters of the American youth.
These protesters are just fumes… This is about oil. This is about oil routes and access to oil. Remember the Brics have it and they know it. We talked last week about the history of fracking and how it doubling American production has largely saved us from much much higher oil prices. Americans are now pumping more crude than anyone else in history and OPEC+ doesn’t like it. It is pushing the price down despite their production cuts. All true and with a lower price, Russia makes less cash to fund its war. Since the beginning I think the state department believed that the US could use the Soviet playbook and use the American economy to break Russia just like Ronald Reagan did in the 80s. We talked about how the ruble spiked and how their central banking head, Elvira Nabiullina responded with instant interest rate hikes and brought the ruble down to where it strengthened versus the dollar from the beginning of the war. Well we are approaching the 2 year mark and there has been a lot of spending and the Russian inflation numbers are starting to rise, now to over 7%, and with it the central bank raised interest rates to 16% to help cool inflation. We almost cracked in the spring with the regional bank crisis and almost in October when we struggled selling debt, but now the Russians are feeling the pinch of war spending. Lloyd Lee writes for insider.com that Putin is now floating the idea of a ceasefire. The Ukrainians have been opposed to that since the beginning but now if American and European arms and aid dries up, then they might not have a choice.
Don’t think for a minute that this is what Biden wants. He wants less oil and more green energy, but when gas prices went to $5 nationally it spooked him and he did his own pirouette and said hey big oil guys pump more oil trying to portray them in a bad light when he has been their biggest adversary. His green climate backers are not happy with him at all. He and the US have no choice but to pump, for now.
In 2008 we lost control of the oil price and it just about sunk us along with the housing market. We found salvation with fracking, but fracking is about to end, in the next few years, and our temporary oil independence is about to retreat like the French in the face of German resistance. Fracking is getting more and more difficult and although there have been lots of holes drilled and our technology is getting better, there hasn’t been enough development of non-fracking sites in the US. Tree huggers like Biden want to save the reindeer and Alaskan drilling has dropped by about 1.5 million barrels a day in the last 30 years. Green energy would save us, but every week I try to put out information that the green energy plan isn’t going as advertised. Fracking has doubled our output since 2007 and we are back above 2019 production levels catching everyone by surprise and kept the price roughly half of what it was in 2007 and that has kept inflation down, but Zachary Frazier writes for Oklahomaminerals.com quoting Pioneer CEO Scott Sheffield, “the combination of investor pressure and limited well inventory means he cannot drill as he once did. “You just can’t keep growing 15% to 20% a year,” he said. “You’ll drill up your inventories. Even the good companies.”
You see the public thought fracking would last forever, but it is expensive and it depletes rapidly. Higher interest rates have caused some companies to not drill as much in the capital intensive industry. Fracking was just 7% of oil 20 years ago but now is 67%. It is good for now, but as Frazier writes “Five of the largest shale companies— EOG Resources Inc., Devon Energy Corp., Diamondback Energy Inc., Continental Resources Inc., and Marathon Oil Corp. —all have about a decade or more of profitable well sites at their current drilling pace, according to the Journal’s review.
They would exhaust that inventory within about six years if they grew output 15% a year, according to analytics firm FLOW Partners LLC, which provided one of the analyses the Journal reviewed.” America needs a plan because we are over 15% higher than when the article was published meaning 5 years of inventory or so left for many of these companies without drilling and expanding into areas that are beginning to appear tapped out. Roger Blanchard writes for Resilience.org “Essentially all of the tight oil production increase from shale plays in the U.S. has come from 5 plays: Permian Basin, Eagle-Ford, Bakken, Niobrara and Anadarko… In my opinion, 4 of the top 5 shale oil plays in the U.S.: Bakken, Eagle-Ford, Anadarko and Niobrara will not again reach previous production levels and will, in general, decline like what has happened in the Barnett shale.” He is referring to an already played out shale gas play. That’s his opinion, what about Scott Sheffield over at Pioneer Resources? He sold his business to ExxonMobil.
Biden is playing a waiting game in Ukraine with Putin, but the Middle East is playing a waiting game with the United States regarding oil. They know we have a 130% debt to GDP, an overstretched military, a ballooning domestic deficit, long term debt that is struggling to be sold, and an energy independence that is about to disappear in just a few years. That doesn’t mean they want to poke the bear directly or right now, but they are itching to weaken him. As for our long-term energy future, It is very similar to the EV cars discussion that we went through last year. Copper and rare earth mines can’t be started overnight and drilling for oil is the same. The longer we wait to allow permitting and exploration, the more acute the energy pinch will be. Luckily for us, we have energy, but we are going to have to rid ourselves of this green ideology before we can tap it. Europe doesn’t have that option. Too bad we blew up their pipelines, but I guess we needed a market to sell to.
Sincerely Yours,
C Thomas Printer
On this date in history…192 years ago to be exact, Charles Darwin set forth on his voyage aboard the HMS Beagle, the second most famous beagle after Snoopy. He would postulate his theory of evolution by its conclusion.
Also born on this date, the father of microbiology, Louis Pasteur.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.
https://www.newarab.com/news/what-israels-ben-gurion-canal-plan-and-why-gaza-matters
https://www.bbc.com/news/world-middle-east-67764664