Having decided to abandon the P5+1 nuclear deal with Iran, the Trump Administration has shifted toward a policy of regime-change. The main focus of this is re imposition of sanctions on Iran, particularly an effort to drive oil exports to zero.
This wouldn’t be consequence-free, however. Even if the US is only able to cut Iran’s oil exports in half, it could have a devastating impact on the global economy, fueling a major surge in global oil prices. Supply is already a bit tight, and taking Iranian supply off the table would make things far worse.
Commodities analysts are projecting a 20%-25% spike in the price of oil, which is already at high levels. This could easily be worse, as the price of oil tends to be particularly sensitive to momentum trades after major swings.
Iran’s increased exports are a big part of why the price of oil hasn’t gotten much higher. The State Department’s threats to China and India intends to drive Iran exports completely off the market. India has said they intend to comply, and even if China doesn’t, it’s not clear they’ll be buying enough to prevent these sanctions from being a major challenge to the markets.
With some concerns about the fallout of this, the US is backing off State Department claims that no waivers would be given. They are now saying Iran oil waivers will be handled on a case-by-case basis.
The Trump Administration is shrugging off this fairly glaring flaw with their plan, with President Trump demanding Saudi Arabia simply produce far more oil to wholly replace Iran on the market. The Saudis already anticipate record production, and that’s before trying to make up for any Iran shortfalls on the market.
There are strong economic incentives for the Saudis not to follow the Trump plan. The Saudi state oil company has been trying to make up for Libya and Venezuela’s oil production cuts, but could stand to make a lot of money with record production combined with a price surge. Even if the Saudis could totally replace Iran, which they probably can’t, they have ample reason not to.
This likely means the Saudis making a token effort to keep Trump semi-placated, the price of oil surging as US sanctions take effect, and growing efforts by Iran to keep getting as much of their own oil on the market as they can.
Ironically, the higher prices could well mean that a cut to Iran exports might not do much economic harm to them. The more prices increase, the more incentive the world has to buy from Iran over US objections. This will cap US sanctions efforts in the near-term.
Insightful observations; its driving season in the West.
Having tasted oil in the mid-US$ 70s, oil producing nations will likely allow sweet crude prices to rise and stabilize within five or six dollars shy of an ~$US 80 Brent benchmark. Saudi oil is mostly sour oil, and sells cheaper than that, what they have left of it
Its doubtful any of the producing nations will care what Trump thinks when that kind of money is at stake. For Saudi Arabia, they have to make the next 20 years count.
If China or India squawk, well then maybe they’ll listen. However, with a trade war looming, oil producers will be leery of reduced demand and not inclined to crash oil prices again, as Trump may be inviting.
“risk” global oil spike? these crooks loaded on call options months ago, insider trading is legal.
Zio-Washington is marching to Israel’s tune: destroy Iran’s economy by any means necessary. And if this Iranian boycott harms hundreds of millions of people around the globe (including Americans) so be it.
What matters most is Israeli security and Zionist hegemony.
Those hundreds of millions don’t include the folks in Washington. A minor burden compared to the people living from paycheck to paycheck.
It’s awful strange that I keep hearing the same refrain from a lot of folks in front line positions, no matter how much they make on paper, the actual take home pay is inevitably stuck around 24k a year. It’s like the whole nation is being pencil whipped so that a few addicts can continue to skim off the top to feed their billion dollar a week killin brown people habit.
High oil prices good for Russia
For a BRIC member like India trying to fight the dollar supremacy, they aren’t doing a great job by complying like a good little stooge.
Indians a smart but also a slippery lot.
Slippery like a jar of Vaseline and smart as a aardvark.
Which is of course exactly what the oil mafia in cahoots with the left pseudo-environmentalists wants.