Michael Every and Joe DeLaura of Rabobank contend that the Iran War may hasten the transition from unified oil markets to Balkanized pricing and settlement blocs. They draw attention to past examples of fragmented oil and gas trading, emphasize the importance of swaplines and sanctions, and caution that future oil flows might be influenced more by security agreements, currencies, and geopolitics than by pure market forces.
From a single oil price to numerous
"We are merely pointing out that Balkanization is one of the hazards ahead. Whether the US wins or loses the Iran War, energy supply chains are already moving because of it, and after it is finished they are likely to change substantially further."
"The presumptive law of 'one market price' has not always held and may not hold ahead; economic history is replete with deep geopolitical energy price and payment splits, often for years or even decades."
"As a result, we might be heading toward a future in which energy is a strategic asset that flows through geopolitically-constrained supply chains based on security pacts, payment currencies, and swaplines, as for large portions of the 20th century for many economies, and others as of today, rather than a fungible number on screens that flows to the highest bidder in a neutral global market."
From a single oil price to numerous
"We are merely pointing out that Balkanization is one of the hazards ahead. Whether the US wins or loses the Iran War, energy supply chains are already moving because of it, and after it is finished they are likely to change substantially further."
"The presumptive law of 'one market price' has not always held and may not hold ahead; economic history is replete with deep geopolitical energy price and payment splits, often for years or even decades."
"As a result, we might be heading toward a future in which energy is a strategic asset that flows through geopolitically-constrained supply chains based on security pacts, payment currencies, and swaplines, as for large portions of the 20th century for many economies, and others as of today, rather than a fungible number on screens that flows to the highest bidder in a neutral global market."
