Posted on 03/29/2007 11:33:21 AM PDT by BenLurkin
What's a single British sailor worth to the Iranian government? In excess of $2 million, so far.
Oil analysts have pointed to the political tensions stemming from Iran's capture of 15 British sailors and marines on March 23 as the prime catalyst that has moved crude prices higher every day since. That's provided a nice little windfall for the world's fourth-largest oil producer.
From a closing price of $61.69 a barrel the day before the capture to the latest trading price of $65.34, crude has risen from as little as four cents to as much as 67 cents in each of the last five trading days. Multiplying the increases by Iran's average daily production of 4.2 million barrels nets an extra $38 million in proceeds that have hit the country's coffers, or just over $2 million for each sailor captured.
Shareholders of big Western oil companies have benefited too, of course. Shares of BP (nyse: BP - news - people ) are up 6.5% since March 22, leading the sector higher in tandem with oil prices. Exxon Mobil (nyse: XOM - news - people ) is up 3.3% and Chevron (nyse: CVX - news - people ) 4.5% over the same period.
Iranian authorities said the sailors were in its waters illegally, a claim that the British deny. Prime Minister Tony Blair has said that if the fleet members are not released, the conflict will reach a "new phase."
And if that happens, the structure of oil prices would likely hit a new plateau of its own, making Iran's extra take this past week look like chump change.
"If things get out of control, this will spill over beyond Iran and affect supplies--it could get very ugly," says Fadel Gheit, an oil analyst at Oppenheimer & Co. He doesn't think the standoff over the sailors is likely to push oil prices to the $80 and beyond level by itself, but an escalation would do the trick.
Some warning signs are certainly there. The U.S. recently launched a series of military exercises in the Gulf, interpreted by many as a stern warning to Iran that it's serious about not tolerating the country's nuclear program. And the United Nations Security Council agreed last week to tougher economic sanctions on Iran in response to its failure to suspend uranium enrichment.
For Iranian leaders, there's certainly been a benefit for bad behavior. Thumbing their noses at the U.S. and U.N. on nukes, taking British sailors hostage and publicly declaring a wish to see Israel "wiped off the map" all succeed in creating tensions that result in rising oil prices. That means cash for Iran. Theoretically, the country could keep pushing until the U.S. or one of its allies got fed up enough to bomb its nuclear facilities.
Escalating hostilities could also result in Iran blockading the Strait of Hormuz, where 20% of the world's oil passes. If the country's control of that waterway results in $100 a barrel oil by, say, the end of May, then it would parlay the $34 million Iran has raked in to date into a cool $5 billion, possibly enough even for some type of reactor.
Is it likely? No. But, as Gheit points out, a group of hostages Iran grabbed up 28 years ago "spent 444 days as [their] guests."
$2M a day?!
Ping!
If the Strait is blocked it would stop oil shipments from the Gulf, including most of Iran's. Iran would find itself without oil revenue, probably for a long time.
What a scam they're pulling.
Ben, thanks for posting this very interesting "take/look" at the extra profit the Iranians have made this week by seizing the British sailors/Marines.
Probably at least 10% of the extra profits will find its way back to America to enrich the re election campaign funds of Pelosi, Murtha, Kerry, Reid, Durban, Waters and other rats in congress who hate America and President Bush, and the Rinos like Hagel.
Yep. Huey Chavez would be dancing but the Iranians wouldn't be making a profit on what they couldn't sell. It's always an option.
I suppose they won't change tactics, since oil-for-food worked so well for Saddam for so long.
This works in Mexico now, too. Hostages are getting more popular as a quick way to make money. Civility, where has it gone?
How much does Iran take a loss on as well because they have to import gasoline as well?
"Escalating hostilities could also result in Iran blockading the Strait of Hormuz,"
That would last about 5 minutes.
That they could not make the case to the American public for the need for us to drill more of our own oil - It astounds me how inept and pathetic the GOP/RNC Congress was.....while GWB took all the arrows the past 6 years...He took all the enemies fire and these useless pieces of junk couldn't flank the DEMs/MSM on a single issue to support the WH (and help take back the initiative).
Not on the WOT, the great economy, or the need for drilling more from domestic oil sources.
With all that said......Where this situation is going concerning these 15 U.K. Marines and Sailors is clearly unknown at this time.......but we are few days away from this reaching a point of no return. I still think we are 5-7 days away from that point.
Agreed. Iran can't block the Straits.....They would cause a short term scare that would hurt the markets and spike the insurance lenders.....but within a few days that would all begin to settle back down as the Straits would remain open.
The Spec guys might make it last a couple weeks...
Since the authorities are not talking about their plans, it would be a guess, but they are probably thinking days rather than weeks. PM Blair mentioned days as being the appropriate time unit for resolution of the situation.
But Blair (UK) isn't the one holding the cards here (in regard to this reaching the point of no return). The Iranians are......Which is why I can see this going another week or so before reaching that point.....Where they can't just spit out some hyperbole, declare a quasi victory and release these 15.....(at that point the UK will do nothing).
However, if this turns into a real legit, longterm hostage situation....with the Iranian notion of a full elaborate trial and punishment......Then?
Well then do the people of the UK have the stones to cowboy up and do whatever it takes to rectify this situation....Blair has the stones to, his warriors do.... but I'm not so sure if he has the support within the UK populate as a whole for it.....
Meanwhile Iran reaps the windfall profits for oil prices...
Uh, no. You'll remember they tried that before, and it didn't work.
The flip side of that is the more likely scenario. If they don't hand the soldiers over, we'll close the Strait to Iranian shipping, while leaving it open and secure for all others. Iran won't be able to ship oil or receive gasoline, or anything else. Without oil income, and without sufficient gasoline to operate her economy, the pain will be transmitted and felt immediately.
The price of oil will spike temporarily, but Iran won't benefit from the higher prices.
I wonder when we will hear from the rats in Congress and in control of the MSM about how cruel this behavior is to the Iranians.
The wisdom and validity of a selective blockade against Iran grows each day.
"The US War against Iran We Are Not Seeing"
This is the type of activity/action where the Bush Administration is so good at.
Miss Marple labeled actions like this, the Stealth Presidency during GW's first year after 9/11.
While the MSM and rats in congress are screaming and lying about President Bush, his stealth presidency, quietly and efficiently does actions like this.
Thanks for the good news and ping.
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