Iranian Oil 224.88.
(photo credit: AP)
As transportation minister, it is certainly part of Shaul Mofaz's job to help develop mass transit and encourage more people to use it. This weekend he arguably contributed more than his share to this worthy cause. Unfortunately, the effect was certainly inadvertent, and not limited to this country alone.
Mofaz's comments in Friday's Yediot Aharonot that an Israeli attack on Iran's nuclear facilities was "unavoidable" made headlines around the world, but decidedly not in a good way. The price of crude oil subsequently made a record one-day jump of $11, hitting an all-time high of $139 a barrel - and Mofaz was given considerable credit across the globe for helping make that happen.
Reported The Wall Street Journal: "Some observers said that single comment, from Transport[ation] Minister Shaul Mofaz, may have given oil prices a greater shot of adrenaline than anything else.
'It's one word that did this,' said Guy Gleichmann, president of United Strategic Investors Group, a commodities brokerage in Hollywood, Florida. Unavoidable. It's basically saying, 'We're going to attack.'
"Rumors of war with Iran, Mr. Gleichmann said, have often led to a spike of several dollars in the price of oil. The issue had died down for a while, he said, but 'this is like Jason coming back from the dead.'"
That last pop-culture reference may be a little obscure for the transportation minister, so to clarify matters for him, let's be clear that being mentioned in any context in connection with the relentless killing-machine of the Friday the 13th horror movies is not a good thing.
If it's any consolation, at least one industry expert opined to Bloomberg: "'The Iranian risk premium, which had left the market for some time, is likely to return and hover over the market in the next few weeks,' said Antoine Halff, head of energy research at Newedge USA LLC in New York.
'The knee-jerk reaction to the comments by Mofaz will wear off quickly because Israel would not broadcast its intention in this fashion.'"
No it wouldn't, and unfortunately little of the foreign reporting bothered to mention that Mofaz's comments came in the context of his battle for the Kadima leadership, looking toward a party primary expected to take place sometime in early autumn to choose Prime Minister Ehud Olmert's eventual successor.
Also left out was the fact that the Teheran-born Mofaz, who understandably seems to take the Iranian situation to heart, has made a habit of talking tough to the rulers of his native land.
None of this excuses him from unwisely shooting off his lip at a time when the Iranian challenge demands from Israel's leadership that every word they utter on this situation be prudently measured before being issued, a consideration that the transportation minister best take to heart if he really sees himself as prime ministerial material.
But while Mofaz deserves the brickbats he has subsequently received from political colleagues and pundits, this issue also needs to be put into proper context, one that goes far beyond Israeli rhetoric directed toward Teheran.
The real problem here in relation to contending with Iran's nuclear ambitions is not that one ill-chosen comment from Jerusalem helped raise the price of crude to $139 a barrel, but that it was anywhere near that level in the first place.
Just two years ago, a Bloomberg report noted: "Escalation of the dispute [over Iran's nuclear program] has helped to boost oil prices by 17 percent over the past two months. The current price of about $70 reflects potential disruptions over the next six to 18 months, said Jamal Qureshi, lead oil industry analyst for PFC Energy, a risk-analysis firm in Washington. Even with that, a military conflict would shock the system so 'you'd very likely get a quick spike that could very easily go to $100 a barrel,' until the US releases oil from its strategic reserve, Qureshi said in an interview. 'It could get messy real quick.'"
Imagine that - $100 a barrel! That now seems like a bargain price.
The startling rise in oil prices is dependent on many factors, including apprehension over the consequences of a possible US or Israeli military strike on Iran.
What now is the speculative price per barrel in the event of that happening: $200 per barrel? $250? Even more?
If that sounds extreme, it isn't. Iran is the world's fourth-largest exporter of oil, and while the US is no longer a direct customer, plenty of other nations are.
The real danger, though, is not a cut-off of Iranian crude, but the millions of barrels shipped daily from elsewhere in the Persian Gulf through the Straits of Hormuz, that constitute about 20% of the world's consumption.
It has long been speculated that among Teheran's retaliatory measures in the event of a strike on its military facilities might be an attempt to cut off that flow, perhaps by trying to sink several tankers in the straits.
Michael Eisenstadt, an Iran expert at the Washington Institute for Near East Policy who has extensively studied Teheran's naval strategies in the Persian Gulf, has asserted the waterway is too wide and deep for that contingency.
But in testimony before the US House Armed Services Committee two years ago, he pointed out: "Iran's force of mines, missiles, small boats, and submarines could temporarily disrupt shipping in the Strait of Hormuz. Iran could conduct limited amphibious operations to seize and hold lightly defended islands or offshore oil platforms in the Gulf.
"Its naval special forces could sabotage harbor facilities, offshore oil platforms and terminals, and attack ships while in ports throughout the lower Gulf, disrupting oil production and maritime traffic there."
Seen in this context, hostile Iranian naval actions directed toward US and British forces in the Gulf the past few years look less like blustery posturing, and more like a very real implied threat.
To contend with this challenge, Eisenstadt recommends a major beefing-up of US naval forces in and near the Gulf, along with greater security cooperation (including military aid) to American allies in the immediate area.
There is little Israel could contribute directly to this effort. What it could at least do though, in this contingency, is prepare for the fact that oil prices are likely to shoot up to previously unimaginable levels, and some blame for that is sure to be laid at Jerusalem's doorstep, disproportionately in some quarters, even in the US.
One American Jewish leader comments on this matter: "This is the issue for those of us who care about Israel. At a certain point, Americans might sell their grandmothers for the ability to drive their SUVs. People who are rich can go buy a Prius, but someone with a 10-year old Chevy Tahoe who is already paying higher prices for gas can't afford a Prius.
"Fortunately, the risk that Americans would blame Israel for high gas prices is less now than it was a year ago. Without anyone bombing Iran the gas prices are going up at an average of a penny a day. It's now around $4 a gallon - without an Iran issue. Folks are starting to learn that there are a combination of factors to gas prices - high demand in India and China, difficulty in Nigeria, [the] fact that US environmentalists refuse to allow drilling in Anwar and off US beaches, stock speculation and the fact that some food sources are being used to make ethanol.
"Alternative energy and conservation are key issues to a strong Israel. [President] Peres gets this. Some pro-Israel leaders do. But if AIPAC and other groups made this a top priority I bet you'd see more action on this front."
Indeed, it is Shimon Peres, from his ceremonial bully pulpit, that has done more than any of his political peers to publicly push the notion that Israel can become both a model of alternative-energy consumption (via a revolutionary electric-car program) and contribute through its technological expertise to that effort elsewhere in the world.
Even if only on the level of rhetoric, this is a valuable perspective to push forward in the event of an oil-price scenario of the type described above.
Unfortunately, one official who has contributed little to this discussion is the one who should have the most to say about it. And that's because Transportation Minister Shaul Mofaz has apparently yet to learn that what is needed now is fewer crude threats about how Israel will handle Iran's nuclear threat - and slicker talk about what this country can contribute to blunting Teheran's oil weapon.