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."
Just a great big wonderful post!
It is time to give these death wish Islamofacists what they want, not our deaths, theirs.
Tony needs a 24 hour deadline before the UK and we start a total blockade of ships leaving Iran and ships heading to Iran.
He should notify Lloyds of London that if his sailors and marines aren't released in 24 hours, any ship caught entering or leaving Iran will be boarded, seized and possibly sunk.
If Europe, the other most likely recipient of missle diplomacy, doesn't see the dangerous precedent, then the US must act alone to stop the Iranian thugs.
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