Iran Cuts own Throat, Stops Oil Exports to EU

via Iran ‘stops oil exports’ to UK and France – Middle East – Al Jazeera English.

Iran has stopped selling crude to British and French companies, the oil ministry has said, in a retaliatory measure against fresh EU sanctions on the Islamic state’s lifeblood, oil.

Most countries in the EU have stockpiles that will last them several months, until supplies from Saudi Arabia and others can catch up with the shortfall.  Hardest hit will be Greece, the debt-ridden nation.

Motor Oil Hellas of Greece was thought to have cut out Iranian crude altogether and compatriot Hellenic Petroleum along with Spain’s Cepsa and Repsol  were curbing imports from Iran.

Iran was supplying more than 700,000 barrels per day (bpd)  to the EU plus Turkey in 2011, industry sources said.

By the start of this year imports had sunk to about 650,000 bpd as some customers cut back in anticipation of an EU ban.

Will Saudi Arabia, Qatar, and other Middle Eastern oil-rich states be able to make up the short-fall?  How much will the price of oil rise?   How will the resulting increase in gasoline and foodstuff costs affect the worldwide economic crisis?

And in the United States, how will Newt Gingrich be able to provide $2.50/gallon gas, as he recently promised?  Doesn’t he realize that world markets are a little beyond his control?

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Closing the Strait of Hormuz?

via Iran Threatens to Block Oil in Reply to Sanctions – NYTimes.com.

WASHINGTON — A senior Iranian official on Tuesday delivered a sharp threat in response to economic sanctions being readied by the United States, saying his country would retaliate against any crackdown by blocking all oil shipments through the Strait of Hormuz, a vital artery for transporting about one-fifth of the world’s oil supply.

Merely uttering the threat appeared to be part of an Iranian effort to demonstrate its ability to cause a spike in oil prices, thus slowing the United States economy, and to warn American trading partners that joining the new sanctions, which the Senate passed by a rare 100-0 vote, would come at a high cost.

The first sanctions against Iraq, in 2006, did nothing to slow their uranium enrichment program.  Although Iran claims the program is solely for peaceful purposes, Western nations are fearful of a ‘nuclear Iran.’  The new sanctions would hit India and China, as well as Europe, very hard, since they buy most of Iran’s oil.  Supposedly the slack could be picked up by Saudi Arabia, but many analysts don’t think that’s possible.  Undoubtedly the price of oil would rise.

Some economists question whether reducing Iran’s oil exports without moving the price of oil is feasible, even if the market is given signals about alternative supplies. Already, analysts at investment banks are warning of the possibility of rising gasoline prices in 2012, due to the new sanctions by the United States as well as complementary sanctions under consideration by the European Union.

Rising oil prices could set back the economic recovery, and cause more economic woes worldwide.  But an even worse outcome is possible – can Iran really block the Strait of Hormuz?  What will our response be if they try?

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