To no-one’s surprise, the fragile 60 day truce that began on June 17 has already been broken by attacks on Iran by the US, by attacks by Iran on US proxies like Kuwait and Bahrain, and by continued attacks by Israel on villages and residential suburbs in Lebanon. It remains unclear whether these firepower exchanges have sunk the truce briefly, or for good.
One aspect of the war has been surprising. Given the importance of the Strait of Hormuz to global commerce…why haven’t oil prices gone through the roof this year? Consistently, oil prices have tracked below the price surge created by Russia’s invasion of Ukraine. No doubt, the global economy has been disrupted. Yet why hasn’t that disruption been so much worse? Javier Blas of Bloomberg News recently suggested ten (paywalled) reasons. Here’s half of them:
1.The China Factor. Significantly, China has cut back its oil imports, which has relieved the global pressure on demand, and therefore on prices. As Blas says:
Last month [May] China imported 6.7 million barrels a day of crude via tanker, down nearly 40% from the 2025 average… That drop of 4 million barrels a day is roughly equivalent to the consumption of Germany and France combined.
2.Demand destruction. Refineries have reduced (reportedly, by roughly five million barrels a day) the oil inputs they turn into refined fuel and petrochemicals. As Blas says, “Either consumers are cutting back significantly, or refineries are running down their inventories.” Or both. Strong demand management measures have been taken across in Asia in general and in India – the world’s third biggest importer of crude oil –in particular.
3.Some oil has still been getting through. Oil has been exiting the Strait of Hormuz secretively, on terms unknown, via routes that commonly involve off-loading to other ships just past the choke point in the Strait. Just before the truce on June 17, the Hormuz trade was reportedly running at around 2 million barrels a day.
4.Initial Oversupply. The Bloomberg report, again:
The oil market was massively oversupplied on Feb. 27, before the conflict started. By how much? Probably 3 million to 4 million barrels a day during the seasonally low-demand period between the end of the winter and the beginning of spring. That oversupply, built on the impact of the US shale revolution and OPEC+ output hikes during the preceding year, has provided an invaluable cushion.
Another cushion has been that increased production in North America (Canada and the US shale oil production) and in South America from Guyana and also (significantly) from Brazil. Before the earthquakes, Venezuela’s oil was also being factored back into the calculations.
5. Refineries have improved. Formerly, refineries were quite specialised as to what types of crude they could handle. Modern refineries can process a far wider range of inputs. This has been good news for New Zealand, which saw the refineries on which we depend – South Korea and Singapore – pivot away from their over-reliance on Middle East sources, in order to tap into the different, lighter oil supplies coming from Canada and the US. Incidentally, this pivot should remind anyone still nostalgic about Marsden Point that expensive upgrades would have been needed at Marsden Point for it to have remained relevant in the current crisis.
These are a few of the reasons why oil hasn’t hit $200 a barrel, as initially predicted. Does it mean New Zealand can relax? Not really. The war has exposed the vulnerability of our global supply chains for fuel, for medicines (most of which come from India and China) for fertiliser and even for tourism, in that getting here requires burning a lot of expensive jet fuel.
In all likelihood, we will ignore those lessons, and assume that regular service will be resumed shortly. At least until the next crisis hits.
War losses, and losers
By and large, the US media has decided that Iran have “won” this war, if only because the US failed to achieve any of its stated reasons for starting the war in the first place. Such as: the collapse of the regime; the US gaining control of Iran’s oil reserves; the destruction of Iran’s long range missile capacity; the seizure/destruction of Iran’s store of enriched uranium etc etc. The US has racked up epic fails on all of those goals.
At the same time, its hard to see any winners either, including Iran. Theoretically, if all goes well from here (!) Iran might see some of its foreign-held assets unfrozen, and some economic sanctions lifted. Even if that did happen, it’s hard to see how the Iranian people will have “won” anything. The domestic economy and its productive capacity are now in even worse shape than before, much of the key infrastructure has been bombed to rubble, and a widely-hated regime has been able to survive, and regroup.
Along the way, thousands of Iranian civilians have been killed. Certainly, the grieving parents of the 120+children killed in Minab by US bombers will not be feeling like winners. Nor will the relatives of the 26 teachers killed in the same raid. While there have been no winners in this war, the nature of each loss has been unique:
Israel has lost. Fittingly for a country that co-started this war, Israel has lost big time. Thanks to its role in getting the US into this mess, Israel appears to have (permanently?) damaged the viscerally emotional allegiance that the US has previously shown towards Israel, ever since the country’s founding in 1948. In an act of hubris, Benjamin Netanyahu has committed the mortal sin of making Donald Trump look bad.
As a result, Israel’s current leaders now find themselves to be on the same purely transactional footing with Trump as every other former American ally. (Netanyahu now has to appease Trump, but without seeming to grovel. Hard to do.) Israel also needs to hold elections by the end of October at the latest. Ironically, Netanyahu is being portrayed domestically as a weak and humiliated US pawn. On current polling, he appears likely to lose to a coalition formed by Gail Eisenkot, a former IDF general and security hawk:
Briefly a member of the war cabinet overseeing the Gaza war, [Eisenkot] has attacked Netanyahu for bowing too readily to U.S. demands for a ceasefire in Lebanon to settle the Iran conflict. He calls demands for a Palestinian state “irrelevant”.
The rise of Eisenkot indicates that Israel is headed further down the path of eternal war, and to increased diplomatic isolation as a global pariah. Unfortunately, this means that Israel’s paranoid stance towards the entire outside world is only likely to increase.
The Gulf States have lost. The war has severely – maybe even terminally – damaged the sense of stability on which the prosperity of the petro-states has largely depended. The illusion that regional US military bases and the Pentagon’s military might would always insulate the Gulf states from regional strife has been shattered – ironically, by the US itself, acting in concert with Israel.
The likes of Qatar will spend the next few years repairing their damaged LNG infrastructure. As they do, they will have to be re-thinking their ties with Washington, and facing the need to co-exist somehow with Iran, which is now plainly here to stay as a regional power.
Lebanon has lost. In the wake of Israel exporting its Gaza model of total destruction to Lebanon, one fifth of Labanon’s current population have been displaced, many of them women and children. Israel now occupies some 600 square kilometres of Lebanon and has issued evacuation orders for villages across one fifth of the entire country.
According to the BBC, the IDF has also killed over 4,000 people in Lebanon since the Iran war began, and wounded another 11,600. By comparison, 36 IDF soldiers and four Israeli citizens have been killed during the recent conflict. Much as Israel talks about self-defence and its need for security, the harms it inflicts on its neighbours is wildly disproportionate.
The US has lost. Thanks to Trump, the US is now a diminished power in the Middle East, both militarily and diplomatically. The limits of America’s military might – and its quickly depleted arsenal of high-tech weapons – have been exposed by a relatively puny adversary. By trying to minimise Iran’s threat to the region, the US has enabled Iran to maximise its ability to weaponise the Strait of Hormuz.
The future career of vice -President J.D. Vance now hinges on his ability to rescue his boss from this mess that Trump co-created.
More politicians at the trough
Come November, many voters will have to hold their nose and vote either for the least toxic option, or against the most toxic option. There’s not a lot to vote for, whole-heartedly. Much has been written already about how MPs and Cabinet Ministers are rorting the taxpayer by pocketing the full available extent of accommodation expenses. Truly, the taxpayer does seem to be providing MPs with a very helpful form of bridging finance for their property investments.
On the weekend Chris Knox’s excellent piece in the (paywalled) NZ Herald added to our sum knowledge of this perfectly legal, perfectly unjust situation. He did so by (a) tracking the explosive growth in the ratio of MPs lining up at the trough, and (b) identifying the rule change made by the Key government that has made it possible.
The growth in the use of this perk has been telling. As Knox writes:
In 2009, about 10% of eligible MPs claimed it – and 75% of them do today. The rules are intended for MPs who aren’t from Wellington to be able to cover the cost of spending time working in the capital.
Specifically, MPs whose “home base is outside the Wellington commuting area” can claim $36,400 a year and ministers can claim up to $52,000 – regardless of how much they actually spend. But 30 current MPs who have property interests in Wellington claim the accommodation allowance, and 28 of them claim the maximum amount.
“Home base” has been a slippery term, probably by design. It has enabled MPs to live in a mortgage free property they own, while claiming the full accommodation supplement if they can claim that their “home base” is somewhere else. As a result:
Last year, NZ First MP Andy Foster purchased a new house in Wairarapa. By declaring and using it as his home base, he was able to claim the accommodation allowance on his long-time Karori, Wellington home….
Minister of Justice Paul Goldsmith bought his Wellington apartment for $325,000 in December 2023 and claims the full $52,000 annual ministerial accommodation allowance – receiving 16% of the purchase price each year. He did not want to comment when approached by the Herald…
And so it goes on…As Knox also points out, Labour leader Chris Hipkins is decrying the rule changes introduced by the Key government, yet a higher percentage of the Labour caucus – 75% of them – avail themselves of this perk than National’s 72%. Reportedly, Labour MP Kieran MacAnulty has previously claimed the full accommodation supplement, despite renting an apartment from his wife.
Not all MPs milk this perk to the max, but they’re very much a minority. Post-election, it is a fairly safe bet that MPs will be awarded a pay rise benchmarked again the private sector, on the grounds this is necessary to attract the best and brightest talent into parliamentary life. More than ever, that seems a bogus rationale. Surely, no further inducements are needed to entice people into availing themselves of sky-high salaries that they could not earn anywhere else, and an array of gold-plated perks.
Is any political party willing to promise a pay-and-perks freeze over the course of the next parliamentary term? Reportedly, Andy Burnham is promising to donate 15% of his parliamentary salary to meet local needs and support community projects within his Makerfield constituency.
Footnote: Also on the weekend, TVNZ ‘s Q& A programme screened a brilliant investigative piece that gathers together evidence of officialdom’s systematic drip-feeding and denying accommodation assistance to those desperately in need of emergency shelter.
Put the Herald article and the Q&A investigation together, and the chasm between those in genuine need and those living high on the hog could not be more striking, or more infuriating.
Angst in stop-motion
Here’s a good, shouty burst of nihilism by the veteran Canadian band PUP, within an ingenious video that reportedly uses 2,300 different frames of stop-motion animation. I’m not sure if the visual ingenuity serves to convey or conceal the sense of desperation:
It’s funny how you come around when you’re out of options
But I just don’t give a shit about your problems
It’s funny how you come around when you’re on empty
But do you really think I wanna spill my guts all over the concrete?
I just wanted you to stay awake…