Hormuz not opened

Trump withdraws his demand

US President Donald Trump on Tuesday withdrew his proposal that the USA charge a fee from all ships transiting the Strait of Hormuz, instead of Iran charging a fee. The withdrawal came after the intensification of the war between Iran and the USA,, with a further exchange of missiles and bombardment, with the USA continuing to target Iranian cities, and Iran to target US bases all over the Gulf. Mr Trump’s proposal ran into trouble because it could not be enforced: the USA simply did not have the physical control over the Strait the fee implied. Whether the USA was justified in charging such a fee or had any right to do as, was a later issue. First came the physical ability, which it did not have. Subsequent questions thus became moot.

The closing of the Hormuz Strait has assumed a lurid on-again off-again quality, and has led the government to contemplate daily oil price changes rather than the present weekly ones, in itself a response to the March closing of the Strait, a transition from a fortnightly or monthly fix previously. Originally, a very long time ago, oil prices had been fixed annually, a kind of stability long abandoned, almost mythical. Then there is the decision that the Platts prices on which the Oil and Gas Regulatory Authority bases its pricing recommendations, be posted on its website. Platts used to be arcane information only available to industry insiders. Now S&P Global Energy, it remains subscription-based, and OGRA might find implementing this decision miring it in copyright issues it might not want on its plate. Oil markets have never recovered global stability from the time of the 1973 OPEC oil embargo, but the kind of volatility seen now is unprecedented.

The government is finding its economic policy’s biggest weakness exposed: an oil price shock. However, its resilience will be seen by how long it takes for it to pick itself up, dust itself off and get on with it. The kind of conflict now being imposed makes it likely that oil prices will go back to their peaks, for there to be a ceasefire when there is too much pain in the USA, and for the USA to lose even that lever when the November elections are over. After that constraint goes, after Mr Trump knows the worst, there is no telling what he might do.