The Oil Weapon and Iran -- Every Exporting Nation Is Now An OPEC In Its Own Right
An insightful article in Al-Ahram Weekly from Cairo discusses why the Iranians have decided to go forward with their nuclear program despite the political risks attendant upon international disfavor. According to Al-Ahram conservatives within Iran have made joining the nuclear club the central principle of their dreams of national prestige. Iranian conservatives must move forward on building the nuclear bomb if they are to retain any credibility at home.
It is interesting to note, however, that Iran's "move forward" is coming at a time when oil exporting nations are in a position of tremendous power. Because demand and supply are now so tightly balanced, the Iranians know that sanctions against Iranian oil exports would be suicide for the West, China, Japan and other oil importing regions.
Of those nations on the UN Security Council, only Russia would stand to benefit from $100 oil, and Russia has stated, perhaps a little slyly, that it opposes sanctions.
The present situation is reminiscent of the days before the 1973 oil crisis. As crude oil demand exploded in the early 70's and as America passed its own "peak oil" in 1971-72 and was unable to keep up, power shifted to the oil exporting nations in OPEC. This pricing power over such a vital commodity inspired geopolitical assertiveness, the nationalization of Middle Eastern oil fields and an embargo against the West to punish America for its support for the Israeli military in their war against the Arab nations.
What is fascinating about the current situation is that no country has sufficient excess capacity to replace the exports of any significant oil exporting nation. This makes every oil exporter of any size equivalent to its own OPEC, capable of sending oil prices dramatically higher by removing even so little as a million barrels a day from worldwide production.
As worldwide demand surges ahead, prices are headed higher. A supply interruption would only accelerate the upward move in prices. The Iranians know this, and thus they can (or believe they can) act with impunity. Iraqi oil production declined to negligible levels after the Iraq War began in 2003. A loss of Iran's 2.3 million bpd of exports even for just a few months would be catastrophic.
What will America do? The signs don't look good. Dick Cheney said just a few days ago that even though a price spike is likely over Iran, "$100 oil is better than a nuclear-armed Iran." Yikes!
My concern is that $100 oil is coming without problems in Iran. What we may well get is $150 oil, and that will sound the death knell for the post-real estate bubble economy of this nation.
It is interesting to note, however, that Iran's "move forward" is coming at a time when oil exporting nations are in a position of tremendous power. Because demand and supply are now so tightly balanced, the Iranians know that sanctions against Iranian oil exports would be suicide for the West, China, Japan and other oil importing regions.
Of those nations on the UN Security Council, only Russia would stand to benefit from $100 oil, and Russia has stated, perhaps a little slyly, that it opposes sanctions.
The present situation is reminiscent of the days before the 1973 oil crisis. As crude oil demand exploded in the early 70's and as America passed its own "peak oil" in 1971-72 and was unable to keep up, power shifted to the oil exporting nations in OPEC. This pricing power over such a vital commodity inspired geopolitical assertiveness, the nationalization of Middle Eastern oil fields and an embargo against the West to punish America for its support for the Israeli military in their war against the Arab nations.
What is fascinating about the current situation is that no country has sufficient excess capacity to replace the exports of any significant oil exporting nation. This makes every oil exporter of any size equivalent to its own OPEC, capable of sending oil prices dramatically higher by removing even so little as a million barrels a day from worldwide production.
As worldwide demand surges ahead, prices are headed higher. A supply interruption would only accelerate the upward move in prices. The Iranians know this, and thus they can (or believe they can) act with impunity. Iraqi oil production declined to negligible levels after the Iraq War began in 2003. A loss of Iran's 2.3 million bpd of exports even for just a few months would be catastrophic.
What will America do? The signs don't look good. Dick Cheney said just a few days ago that even though a price spike is likely over Iran, "$100 oil is better than a nuclear-armed Iran." Yikes!
My concern is that $100 oil is coming without problems in Iran. What we may well get is $150 oil, and that will sound the death knell for the post-real estate bubble economy of this nation.
posted by Cassandra at 1:37 PM
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