Oil, gas, derivatives and war

For several years, oil and other commodities, raw materials, metals, and gas, have had a pricing mechanism tied, more than to market availability, to complex financial transactions. We described this in an article in September 2022, during a serious crisis caused, so to speak, by the unavailability of natural gas (methane) following sanctions imposed on Russia, the most important supplier to European states.

To give an idea of ​​the figures driving these purely speculative movements, in these months in which other formidable war events have disrupted production, transportation, and thus the energy commodities market , the value of “derivatives,” or “futures” contracts on oil prices on specialized exchanges for its trading, has risen from $2.6 billion in June 2025 to $3.9 billion in early April 2026. The financial upheavals linked to the large stock market losses suffered by indebted traders are a precursor to those affecting liquidity flows, with disruptive but longer-term effects.

As if the war were not enough to unleash price storms!

Oil crises are a constant feature of the postwar capitalist and financial system, beginning with the extremely serious one that erupted in 1973, and all are linked to wartime situations in oil-producing areas. This, if historical knowledge and political foresight had even the slightest role in the bourgeoisie’s ability to predict events, would have at least indicated other behaviors than the disastrous decisions of war. 

But the current situation is not a result of a lack of rationality on the part of the governments of one state or another; communists have never questioned the wisdom or folly of leaders and their advisors. Governments and the conduct of states, as we know well, are also bent and conditioned by the needs of capitalism and therefore by the dynamics of material facts and not by the will of their more or less “enlightened” rulers.

Back in 1973, when the financial plague of derivatives was far from appearing on financial markets, the triggers were, once again, local wars in the Middle East, with the Arab-Israeli war, the Yom Kippur War, the closure of the Suez Canal, and the increase in royalties from oil-producing countries. During the two years of war, the price of oil was initially doubled by Egypt and Syria, while the other OPEC countries blocked exports to the United States until January 1975.

In Italy at the time, the shortage of diesel fuel, especially for heating and motor vehicles, forced a curious form of austerity , with a legal ban on driving on holidays and Sundays, along with other measures to conserve petroleum products. But this was merely Italian folklore, a travesty of energy conservation that was accepted almost without much fuss; it would be a little worse, however, if a similar measure were to be revived throughout Europe in the face of a much worse crisis, in a generalized situation that pointed to an impending recession.

Over the course of just under a decade, from 1973 to 1981, with a peak during 1979–1980 following the Khomeini revolution , the disruption of Iranian oil supplies, and the outbreak of the Iran-Iraq war, the price reached $34 a barrel, 19 times the price of 11 years earlier. 

Inflation saw prices rise 9 percent between 1972 and 1983, and with the contraction in consumption induced by austerity policies, production in Europe fell by 10 percent. The vast mass of dollars held by supplier states were poured into European and global financial markets, giving rise to the petrodollar financial crisis, which fueled speculation and led to severe debt, especially among so-called “developing countries,” which was addressed by the International Monetary Fund and the World Bank. The oil price shocks were absorbed, and between 1979 and 1985, the countries of OECD (Organization for Economic Cooperation and Development, which brings together 38 developed countries with market economies)  reduced their demand for crude oil from OPEC suppliers by 20 percent, resulting in a 70 percent drop in the price. The crisis at the time clearly demonstrated its difficult management given all the problems that could arise in the future from violent interventions in the oil markets.

Another energy crisis developed in 2022, following the sharp reduction in production and consumption due to the COVID-19 pandemic (declared to end in 2023), during the Russia-Ukraine conflict, with the Russian army’s invasion in February 2022 and European retaliation. These retaliations led to a reduction in oil and natural gas supplies, which became increasingly severe until they were almost completely cut off. This energy supply had allowed European states, particularly Germany, to generate a production surplus that challenged US capacity and forced the US to cut it off almost militarily.

In that situation, the energy shock induced, at least according to current wisdom, a sharp increase in gas and oil prices; an event that in reality dated back to before the war, as we demonstrated in the aforementioned article published in this newspaper in September 2022. 

This trend was linked both to the physiological pre-crisis inflationary process, but above all to the price formation mechanism on the exchanges specializing in the trading of energy products, which operates not on the volumes produced but on so-called derivative contracts that trade non-physical, but “paper” quantities, bets formalized by contracts on the trend of future prices, upward or downward, in an absolutely speculative manner. 

European governments addressed the crisis by curbing prices, cutting taxes on fuel and electricity, and introducing legal price caps, while shifting capital to energy-producing countries. This is the only solution that states know and can implement. Strategic reserves were thus replenished, at much higher prices than in the past. 

So-called renewable energy solutions are a utopia in the capitalist world, which must continually increase the production of goods and therefore consume ever more energy. Even the use of dangerous nuclear power is costly and very slow to deploy, with timescales incompatible with capitalist needs.

Ultimately, these options, more or less feasible due to costs and, above all, time constraints, have remained a dead letter in most cases. Except for the use of coal for electricity generation, the most polluting solution.

ISPI, an institute of international politics and economics, notes that today the global economy must make do with between 10 and 17 percent less oil than was available before the war in Ukraine. In 1973, however, in a completely different international geopolitical situation and with a different level of general capitalist productivity, a 5 percent reduction in supply by the Arab OPEC countries that lasted for five months caused oil prices to quadruple.

The United States, the world’s largest oil and gas producer, had to keep energy prices high to keep production going with the expensive and polluting fracking technique, and the current situation has been absolutely convenient.

Just four years after the 2022 war, a new war has brought the energy crisis back, but in a different way than before. Now it’s not just a price crisis, but a shortage crisis. The closure of the Strait of Hormuz has reduced the supply of liquefied natural gas by 20%, making the use of coal in power plants profitable again. 

In particular, a particularly serious reduction was seen in LPG (Liquefied Petroleum Gas), a mixture of hydrocarbons that is distinct from methane, transported as a liquid (LNG) by ship or distributed as a gas through pipelines, the notorious gas pipelines that provided European states with a cheap energy supply from Russia. Then the sanctions for the invasion of Ukraine rearranged the situation for US LNG, which found a new outlet.

LPG, transported by tankers, is the product most affected by the Hormuz blockade: China and India are major importers of LPG: India imports 90 percent of its supplies from the Middle East, while China imports primarily from Iran. At least this time, bourgeois market logic has been respected; the price of this product in China has reached its highest level in the last 12 years. China appears to be the country most affected because LPG is important not only for domestic needs and automotive purposes, but is also essential for the petrochemical industry. 

Further aggravating the blockade and the desperate Iranian reaction to the merciless Israeli-American bombings carried out by drones and missiles against US base areas in the Gulf countries is the serious damage to the energy and mining infrastructure in the Gulf. 

The recovery timeframe, which could logically be achieved once the war is over, is currently unquantifiable; and this, too, is reasonable. Bourgeois planners, analysts, and economists have managed to argue that “if the oil shock were more severe and lasted beyond the baseline scenario (??, who knows what this ‘baseline scenario’ is, and above all, how long it will last), inflation could exceed 5 percent in May-June, sending the economy into technical recession by mid-year.” Other analyses and projections raise the possibility of a phase of inflation-stagnation, the prospect that for the bourgeoisie is the worst of all (we communists, however, know that deflation is the fatal outcome for capitalism).

The blockade also has other serious consequences: the forced stoppage of merchant ships carrying fertilizers, whose production depends on the oil supply chain but is nevertheless jeopardized by the unavailability of oil, and the transportation of aluminum, an essential material in many fields. Iranian attacks in the Emirates have hit large aluminum smelters, further exacerbating the supply difficulties caused by the blockade of the Strait.

This situation is evolving unfavorably for the most developed countries. While the prospect of a reopening of the Strait and thus, albeit with the uncertainty of the tolls imposed by Iran, a substantial increase in the share of available oil had led to a significant decline in oil and LNG prices, subsequent political and military developments have pushed prices back up. The United States, after an unlikely announcement of militarily eliminating civilian life in Iran and the failure of talks to broker a political-military agreement, has returned to the fray, imposing its own blockade of the Strait.

The result, yet another sharp rise in the price of oil.

Already in Europe, whose states are most exposed to high oil prices, whispers are beginning to circulate about a moratorium on the energy blockade of Russia. It’s becoming known that Russian gas imports have increased by 17 percent during the blockade, reaching 5 million tons in the first quarter of 2026. Figures provided by the Financial Times also indicate that gas imports from Russia have reached approximately 6.8 billion cubic meters. European authorities had imposed a total ban on gas imports from Russia until 2027, but there is already a tendency to renegotiate this ban, a clear sign that European states, unlike the impotent European Community of Brussels bureaucrats, are beginning to sense the criticality of the energy situation.

Even the United States itself, to contain the frantic price increases, has permitted the transit and sale of Russian oil. This is likely a temporary situation, but it highlights how, despite the profits the American oil industry is making from the high oil trade situation and the revenue the US generates from the sale of its expensive energy products, the financial situation is truly worrying. 

We expect nothing from these traumatic events for capitalism that will benefit our class or the social revolution. The deflationary capitalist crisis will continue its historical course, and war between states will continue to loom, unadvanced by energy crises. However, its breadth and depth are indicative of the intrinsic weakness of the capitalist world, and demonstrate its weakness. From this perspective, crises must be studied and analyzed, certainly using all the studies, analyses, and data that bourgeois theorists make available to seek their causes and, above all, remedies.

For now, we communists have only the task of being cold notaries of “their” disasters, which, as always, they end up unloading onto the shoulders of the proletariat and the middle classes.