Posted on 01/22/2006 9:44:22 PM PST by andie74
A surge in oil prices last week to almost $70 a barrel on concerns about the restart of Iran's nuclear program only hints at what may lie ahead. Prices could soar past $100 a barrel, experts say, if the U.N. Security Council authorizes trade sanctions against the Middle Eastern nation, which the West accuses of trying to make nuclear bombs, and Iran curbs oil exports in retaliation. A sharp global economic slowdown could follow.
That's the dilemma the United States and European nations face as they decide whether to act. But Iran would also pay a hefty price if the petro-dollars that now represent 80 percent of export revenues are reduced, potentially stirring civil unrest in a nation with a 14 percent unemployment rate.
"They would shoot themselves in the foot," said Mustafa Alani, director of national security and terrorism studies at the Dubai-based Gulf Research Center. "It's one thing to test the market psychology, it's another to take the actual step and stop oil exports."
Bracing for sanctions U.N. or otherwise Iran's central bank said on Friday that it is moving its foreign currency reserves out of European banks as a pre-emptive measure.
Iran, the second-largest oil producer within the Organization of Petroleum Exporting Countries, exports roughly 2.5 million barrels per day 1 million barrels more than current excess production capacity worldwide. It also controls the strategic Strait of Hormuz, a critical shipping lane in the Middle East.
"Even if Iran pulled a small amount of its oil off the market, say it pulled a half million barrels a day, I could see oil prices literally jumping over the $100 per barrel mark," said James Bartis, a senior researcher at Rand Corp.
But other oil analysts say prices would likely not climb much higher than $75 a barrel before strategic reserves would be released and demand would begin to taper off as economic activity slowed around the world.
So who would be hurt more? The United States and other nations say it would be Tehran and argue against succumbing to economic blackmail in any case. "We cannot be intimidated by economic threats from their side," Sen. Trent Lott, R-Miss, told CNN.
The U.S. Department of Energy estimates that oil exports finance about half of the Iranian government's budget. And while high oil prices have boosted the annual growth rate to about 5 percent, Iran has never really recovered from its 1980-1988 war against Iraq and trade restrictions on sensitive technologies. The Iran Nonproliferation Act, which the U.S. Congress passed in 2000, deters international support for Iran to develop nuclear, chemical and biological weapons programs and missile-delivery systems.
For weeks, Iran's state television has sought to show a people united behind the leadership, showing passer-by on Tehran city streets expressing their support for the country's strivings for nuclear independence.
Still, Alani of the Gulf Research Center questioned "whether the ordinary citizens will be willing to risk sanctions and endure a lot of suffering like the Iraqis suffered for 13 years" under U.N. sanctions.
Oil consuming nations, meanwhile, have at least one ace up their sleeves crude reserves. The United States and other members of the International Energy Agency have a combined 1.48 billion barrels of oil in their emergency stocks. That's equivalent to about 600 days of Iran's net oil exports of 2.4 million barrels per day.
OPEC might be able to add 1.5 million barrels per day to world production, mostly from Saudi Arabia. And oil analyst Fadel Gheit at Oppenheimer & Co. in New York said Russia might be able to crank up exports by about 500,000 barrels once its domestic home-heating demand eases.
Gregory L. Schulte, chief U.S. delegate to the International Atomic Energy Agency, accused Iran last week of deceiving the world about its atomic program, declaring that moves to haul it before the U.N. Security Council were meant to deny "the most deadly of weapons to the most dangerous of countries."
His comments were part of increasing international pressure on Iran since it removed seals from uranium enrichment equipment earlier in the month and said it would start small scale work on the process that can make both fuel and the fissile core of nuclear warheads.
"It's a very difficult situation where you don't know which side is going to blink first," said Leonard Spector, deputy director of the Monterey Institute of International Studies' Center for Nonproliferation Studies.
It's also not clear the United States could win a referral on sanctions at the Security Council, where members Russia and China are Iran's main allies. Both have strong economic and strategic ties to Iran, with China a large oil consumer and drilling partner and Russia a key supplier of arms and nuclear technology and services for what Tehran says is a peaceful program. Additionally, oil-rich Russia would benefit from higher prices and increased demand for its crude if Iran's oil were off the market.
Influential India, which imports 75 percent of the crude it consumes, some from Iran, is a wild card in the referral struggle.
It joined the U.S., Britain, France and Germany in September to back an IAEA resolution that set the stage for reporting Iran for violating the Nuclear Nonproliferation Treaty. But pressure is building on the Indian government not to vote against Iran when the 35-nation IAEA board meets Feb. 2 to consider actual referral.
"India must not allow itself to be dragooned into joining the Washington-led nuclear lynch mob against Iran," The Hindu, one of India's most influential newspapers, cautioned Thursday. "Aside from the lack of any legal basis for threatening Iran with sanctions, India should consider what the U.S. pressure on Tehran will do to international oil prices as well as to the overall security scenario in West Asia."
The United States and its allies are thought to have the majority behind them on any vote for referral. Still they would like to see India, China and Russia on board all three countries carry weight among other IAEA board nations, and Moscow and Beijing have a vote on the Security Council on what to do about Iran, once it is referred.
What say you, FReepers??
Could you change the title to: Iran Sanctions Could Drive Oil Past $100
My sincere apologies.
We need Iraq on line ASAP!
I'm told that even if we began drilling in Alaska tomorrow it could take up to 15 years before any appreciable amount of oil could be processed for use. Thank the liberal Demo-rats and their save-the-moose idiots for this sad state of affairs. The liberals are hell-bent on emasculating America.
GOOD!!! That's EXACTLY what the price needs to be for us to achieve COMPLETE energy independence -- because that's what it would take to make BOTH Colorado's oil shale production AND Canada's tar sands production viable.
I just want to know what stocks to invest in for the coming crisis.
The facts are'nt like this:
" restart of Iran's nuclear program"
They have been working their program all along. They have'nt stopped anything.
And in case you've been in a coma, all along they have threatened to annihilate Israel...that means every man woman ,child and stray dog... with nuclear weapons.
This is much farther along than mere gas prices Pal.
We are on the verge of worldwide thermonuclear war.
Dabney Coleman, is that you?
"Shall we play a game?"
Not sure it would be worldwide...I do not believe Iran has the capability to wipe out more than a few cities...and they will be facing retaliation from SEVERAL countries if they start it...it wouldn''t take long to pummel them into submission... Although, with our detection technology, our SSBN's would most likely be able to take out some of the missile sites BEFORE they could launch...if not all...Iran has primitive launch equipment as far as I know...not able to "hide" a launch...
Where did you get THAT stat? I just found this one:
In 2003, Persian Gulf countries had estimated net oil exports of 17.2 million bbl/d of oil (see pie chart). Saudi Arabia exported the most oil of any Persian Gulf country in 2003, with an estimated 8.40 million bbl/d (49% of the total). Also, Iran had estimated net exports of about 2.6 million bbl/d (15%), followed by the United Arab Emirates (2.4 million bbl/d -- 14%), Kuwait (2.0 million bbl/d -- 12%), Iraq (0.9 million bbl/d -- 9%), Qatar (0.9 million bbl/d -- 5%), and Bahrain (0.01 million bbl/d -- 0.1%).
-- from THIS Dept. of Energy website
Are you sure that is accurate?? - I haven't checked of late - But unless my mind is slipping on this one I think the last numbers I saw on Iran were around 14% (but this would have been back in 2003/2004 possibly)
30% of the Worlds oil coming out of Iran seems awful high to me. Though I do believe they are the 4th largest oil producer today -
Don't forget the added pressure to resume nuclear power construction.
I think I saw today that Iraq just hit 1.75 million per day.
I was referring to a WSJ article I read. If 30% is a mistake, then 15% is still a huge number. Enough to drive the prices way up there.
Agreed. Without a doubt a war with Iran could cause tremendous problems for the World markets / economies.
If it happens.....it will have to be done / accomplished extremely fast. The World markets would play hell staying afloat during a protracted war in Iran.
These are incredibly serious times in the World. Our actions (U.S.) has made the world safer and we are moving the ME in the right direction......however plenty of very serious and difficult days lay ahead.
This Iran mess seems to be getting hotter by the day:
Round-Up: Senator Will Introduce Resolution on Iran
(CNSNews.com) - To forestall a military strike on Iran, the United States needs to take tough action now, and that means economic and cultural sanctions, a Senate Democrat said on Thursday. Full Story
US Wants Quick Vote on Iran Referral
Jerusalem (CNSNews.com) - The issue of Iran's nuclear development is moving closer to possible resolution in the United Nations Security Council as diplomats from six nations -- the U.S., Russia, China Britain, France and Germany -- met behind closed doors in London on Monday to consider what action to take against Iran. Full Story
http://www.cnsnews.com/
I'd "stock" up on fuel, food, necessities, and LOTS of toilet paper. ;)
re: $100/oil and comment, "because that's what it would take to make BOTH Colorado's oil shale production AND Canada's tar sands production viable."
North America will have the last laugh if economic growth can occur in $80-$100/bbl of oil price.
I would never forget the ammo, but thanks for the reminder. ;)
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