SINGAPORE (Jan 23): The muted and short-term reaction in the crude oil market on the escalation of conflict between the US and Iran signals the end of petroleum diplomacy between the oil states, especially those in the Middle East.
The current situation is markedly different from that in the 1970s and 1980s, when crises in the Middle East triggered oil shocks, jeopardising the health of the world’s economy. In fact, the Iranian revolution in 1979 and the subsequent Gulf War in 1980 sent the US economy into recession.
“It is a different world altogether now compared with that of 1979. The US depends less on crude oil from the Organization of the Petroleum Exporting Countries (Opec) countries nowadays, and the fact that it took actions that can be deemed as reckless shows the end of this dependency,” says Dr Renato Lima de Oliveira, assistant professor at the Asia School of Business.
