U.S. Sailors conduct flight operations aboard Nimitz-class aircraft carrier USS George H.W. Bush (CVN 77), July 29, 2026. George H.W. Bush is deployed to the U.S. 5th Fleet area of operations to support maritime security and stability in the Middle East. (U.S. Navy photo)

There must be a limit to how much uncertainty people can deal with before it starts to affect their judgement. It appears that some of the investment consultants giving advice about crude oil futures and the prospects for peace in the Persian Gulf are having a difficult time keeping both oars in the water.

The Chinese price control conspiracy

Take the case of the investment advisors who propose that the US and China had a secret deal to try and keep oil prices down to less than $100 per barrel from April until early summer. The Chinese would cut their crude oil imports by at least 40 per cent. To do this they would dip into their vast strategic petroleum reserves (SPRs) and capitalize on their ability to ramp up coal-fired electrical power generation. China’s efforts would reduce the impact of the 10.0 million barrels per day (MMbpd) shortfall in global production due to the war and its effect on crude oil prices.

Yes, there are people promoting themselves as investment advisors who actually contend this is a plausible claim.

Jim Puplava, who is the founder and president of Financial Sense Wealth Management, an investment and financial planning firm and Chris Martenson, an analyst for the investment newsletter, Peak Prosperity, both attest to the possibility that  China and the US concocted such a scheme.

Without China’s cooperation, Puplava and Martenson argue crude prices would have risen far higher than they did, which would have caused a more drastic spike in gasoline prices in the US. That is of course something Donald Trump and the Republicans would prefer to avoid in advance of November’s mid-term elections.

Puplava and Martenson go even further into the weeds by speculating that in exchange for China’s cooperation in controlling prices, the US would look the other way if China decided to invade Taiwan. A prediction that is as bold as it is unlikely.

The conspiracy they describe might have actually made sense to the US leadership at the time it was allegedly entered into. This is because in April the Americans assumed Iran was on its knees and the war would end in a month or two at the most.

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But what about the fact that China’s ability to reduce its need for imports has to end at some point? China’s reserves will eventually run dangerously low, if they haven’t already. Furthermore, at some point the Chinese will become unwilling to continue shouldering the economic costs of reduced oil consumption. When those things happen we can expect crude prices to rise to levels significantly higher than they have been since the start of the war. Assuming China had around 100 day’s worth of crude stored in its Strategic Petroleum Reserves prior to the war, by now it will want to resume importing at pre-war levels, and may have already done so.

The China-US conspiracy theory is a symptom of analysts’ efforts to understand why crude prices have not yet risen into the $120per barrel to $140per barrel range expected by energy sector economists at the start of the war. Incidentally, prominent economists who analyze oil markets for a living, like Claudio Galimberti, claim a $140per barrel world price for crude lasting for a couple of months would trigger a global recession.

Clearly it’s a stretch to imagine Donald Trump would be interested in China obtaining control of Taiwan’s world leading chip manufacturing industry just as AI technology is poised to rock the planet. But, then, the Trump White House does a lot of inexplicable things—like starting the war with Iran in the first place.

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Analysts who claim Trump knows what he’s doing

Donald Trump announced his latest strategic brain fart in a speech he delivered in Garden City, New York on Friday, Aug. 14. He said he would “soon declare the Strait of Hormuz a US territory.”

The US doesn’t have the nerve to send any warships through the strait and into the Persian Gulf. How could they possibly claim to exercise genuine sovereignty over the Strait?

Trump also unabashedly proclaimed, “What we’re doing is a great service for the world, not only for ourselves … and we’re really doing ‌a great job.”

“I will never apologize for attacking Iran,” added Trump.

No less bizarre is that there are true believers who swallow this stuff. Art Berman, a geologist and energy industry consultant, has tacitly embraced the proposition that the “Trump administration knows what it’s doing.” He claims many of the people buying oil futures contracts believe the administration’s talk about the war ending soon is reasonable. Otherwise oil futures markets would be predicting much higher crude prices in the coming months than they have been. And because futures prices are used to help determine spot prices, crude prices today and over the previous six months would also have been higher.

According to Berman people investing in crude oil futures have effectively agreed with the Trump administrations expectations in March, April, May, June and July that the war would last no more than a couple months.

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But you would think, predictions claiming it will be a short war must be wearing thin by now. Commodities traders should be catching on. If so, that will be another factor contributing to higher prices in the near future.

Perhaps saddest of all the deluded speculators are the handful who claim, truthfully or otherwise, that peace is at hand because the Trump administration says it is. They go along with the idea that Trump and Marco Rubio are masters of geopolitics and diplomacy and that nobody knows how to make war better than Pete Hegseth.

Fans of Fox News will have noticed some seriously defective analysis supporting the administration’s conduct of the war sometimes finds its way into that network’s news and opinion programs. This is similarly the case on other Trump-friendly online news networks. Those sources of information help sustain belief in the unbelievable.

There must be an audience for what Berman has to say. Why else would the investment advisory and portfolio management firm, Wealthion, host an interview with Berman on one of its regular podcasts?

To his credit, Berman has a good handle on the impacts of the war with Iran on global energy supplies. For example, he concurs with the most recent and reliable estimates of the shortfall caused by the war—approximately 10.0 MMbpd. He goes out on a bit of a limb by claiming the crude sales lost due to the supply shortfalls caused by the war will never be recovered. Indeed, demand destruction is something that other analysts tend to avoid discussing– or if they do it is only to claim it won’t be a serious long-term problem.

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It’s the economics, stupid

Some people in the optimistic camp believe the war in the Persian Gulf can’t go on for long due to the adverse economic impacts it has imposed on all of the countries involved. In essence, the supporters of this view assume that economic rationality alone will cause the war to end and to end as quickly as possible–end of story.

That is, to say the least, a very narrow understanding of geopolitics. Yes, economic conditions can be critically important and are sometimes decisive but there is nevertheless a wide variety of forces capable of shaping the global political environment and wars.

The economically deterministic view of the war’s duration just described was presented this spring in a podcast featuring an interview with Rystad Energy’s Chief Economist, Claudio Galimberti. Clearly Galimberti is a very bright energy market analyst, but a tad weak when it comes to geopolitics and the dynamics of warfare. (At least he appears to be beyond his geopolitical depth when being interviewed for a podcast.)

Galimberti’s oil market predictions assume economic disruption will cause the war to end this fall or by the end of the year. But his theory simply doesn’t hold up when applied to events in the real world. For example, Russia’s decision to continue its war with Ukraine for four years defies the idea that economic losses alone dictate a country’s willingness to continue participating in a war—at least not right away. Putin’s desire to remain in charge and alive currently supersedes his concern over Russia’s economic woes.

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Similarly, Iran’s mullahs and IRGC generals are not only motivated by the latest GDP figures. They are quite content to continue the war even though it creates significant economic hardship for most of the Iranian people. The regime’s leadership will accept a lot of other people’s suffering before they consider surrendering. Hatred of the Great Satan (the US) could trump economic hardship for years to come.

Galimberti’s views may actually be shared by many energy industry analysts and investment advisors. It would help explain why so many analysts and observers are reluctant to discuss the possibility that the war and its aftermath could last for years as opposed to months.

The Strait of Hormuz has effectively been closed for nearly six months now. And the war has featured an ongoing series of fragile ceasefires punctuated by missile, drone and bombing attacks. The tumultuous atmosphere has not been conducive to business as usual market punditry. High priced consultants and wannabe experts are having difficulty explaining what has happened or in confidently predicting what’s going to happen.

But that doesn’t mean they need don tinfoil hats or pull unsubstantiated new theories out of their butts.

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Peter Zeihan speaking Sept. 8, 2022 at the 54th Annual ECC PerspECCtive Conference in San Antonio, Texas. YouTube

Honest analysts admit when they don’t know the answers

Take the popular geopolitical podcaster Peter Zeihan: he’s doing things right. He has managed to remain well-grounded in rationality despite all the uncertainty. Zeihan has made a careful study of the key forces driving the war in the gulf and energy markets. He has identified each of the areas where frustration due to uncertainty has caused some observers to go off the rails.

We know the main frustrations because we share them.

Why are prices remaining surprising low given that there has been a decline of at least 10.0 MMbpd in global oil production? Will prices therefore rise to considerably higher levels? If so, when?

And, let’s not forget questions about when the war will end and when the Straits of Hormuz and Bab-el-Mandeb fully reopen to shipping? Will there be tolls on oil tankers using the straits? How long will it take to repair damaged infrastructure and resurrect shut-in oil wells and fields?

Zeihan tells his viewers what he knows in relation to each question. For example, he describes the challenges related to returning high flow wells and oil fields to pre-war levels of production. And, based on those observations he says we can expect some fields to never recover, others to take years to be rehabilitated, and some to have their production restored fairly quickly. He provides a range of likely outcomes rather than a single set date.

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However, for most of the other big questions bothering people, Zeihan tells you what he knows but freely admits it when there are things he doesn’t yet know or understand. He is not afraid of failing to come to firm conclusions. That is unlike some investment consultants who seem to be overly concerned with looking like experts in possession of vast knowledge. They like to provide answers to clients’ questions. After all that’s what they’re paid for. Perhaps they think lacking clear answers to client’s queries about market conditions makes them look incompetent. Consultants who look as though they haven’t done their homework might be deemed unworthy of their big fees and commissions.

Is the foregoing too hard on investment advisors and analysts?

There may indeed be too many moving parts, too many variables and contributing causes, plus too much secrecy and too little reliable geopolitical information about the war. It’s easy to imagine how people could get frustrated. That’s no doubt partly why normally serious and rational investment advisors have sometimes been reduced to making ridiculous predictions that have more in common with conspiracy theories than considered analysis.

Maybe it really isn’t all their fault.

Canadian born economist, John Kenneth Galbraith, explained why this sort of behavior has plagued economics.

Roughly paraphrased, Galbraith said “Economists don’t make predictions because they know the answers. They make predictions because they are asked.”

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