by Jerome a Paris
Tue Apr 4th, 2006 at 06:10:20 AM EST
We've been discussing the possibility of some form of war or conflict with Iran repeatedly, and the oil markets have certainly taken notice of the "increased chatter" on that topic.
Together with the ongoing unrest in the oil producing provinces of Nigeria, the market was unpleasantly surprised by the test by the Iranian Navy of a new ultra-rapid torpedo, seeing it as both an escalation of the crisis by the Iranians (thus increasing the likelihood of conflict), and a very serious threat to supertanker traffic in the Persian Gulf.
Prices went up by 2$ in an instant, not an unsignificant jump, and bringing them at their highest ever, barring a couple of days after Katrina struck.
But the most worrying is probably the declaration by the Iranian vice-Minister for oil:
Mohammad Hadi Nejad-Hosseinian, Iran's deputy oil minister, yesterday hinted at Iran's ability to influence the oil price when he said: "Any fall in oil prices this year is unlikely...A sum of factors show that prices will not fall in the next two or three years unless there is a conspiracy against oil."
(A more complete quote can be found here - the only additional information is that he mentions the 50-60$ range for prices).
This looks very much like a show of muscles by Iran, and a very clear indication that they are warning the White House as explicitly as they can that thye have weapons available to retaliate to any attack:
(i) the ability to sink supertankers, and possibly US Navy ships;
(ii) the ability to keep oil prices high (and, this is not said, but it is true, a lot higher if need be).
We've all heard the arguments that this White House has a logic of its own and will not be stopped by such "facts on the ground", and will keep on pushing for a confrontation, but the Iranians are throwing down the gauntlet and effectively telling the chimperor that he is naked. What will he do?
The markets obviously find it credible that he will keep on pushing, and are beginning to price this accordingly, with prices at pretty much the same record highs as when 1 mb/d of production were brutally pulled off the markets in the Gulf of Mexico following Katrina's passage, and quotes like this one suggest that this is not over:
"Current price levels for crude oil are an accurate reflection of supply and demand fundamentals and, arguably, prices would be even higher were the full range of geopolitical prices accurately priced in by the market," said Kevin Norrish, of Barclays Capital.
Call this the Bush tax on oil.
Paid by US (and other) consumers directly to Iran, the supposed enemy. How smart is that? Is the fact that a part of that "tax" goes in the pockets of his oil friends in Texas enough to justify that $200 billion surcharge on US consumers? (considering the increase in oil prices over 40$/bl only).
The mullahs are laughing all the way to the bank. They hold us by the balls, and Bush is basically saying "nah nah nah you won't dare squeeze, raghead!".
Oil wise, Bush is a squeezer, not a squeezee. Traitor, anyone?
Earlier "Countdown Diaries":
Countdown to $100 oil (24) - What markets are telling us about future energy prices
Countdown to $100 oil (23) - Running out of natural gas in North America
Countdown to 100$ oil (22) - gas shortages in the UK - 240$/boe
Countdown to 100$ oil (21bis) - long term vs short term worries
Countdown to 100$ oil (21) - 8-page extravaganza in the Independent: 'we're doomed'
Countdown to 100$ oil (20) - Meteor Blades is Da Man in 2005
Countdown to 100$ oil (19) - Your bets for 2006
Countdown to 100$ oil (18) - OPEC happy with oil above 50$
Countdown to 100$ oil (17) - Does it matter politically? A naked appeal for your support
Countdown to 100$ oil (16) - We'll know on Monday
Countdown to 100$ oil (15) - the impact on your electricity bill
Countdown to 100$ oil (14) - Greenspan acknoweldges peak oil
Countdown to 100$ oil (13) - Katrina strikes / refinery crisis
Countdown to 100$ oil (12) - Al-Qaeda, oil and Asian financial centers
Countdown to 100$ oil (11) - it's Greenspan's fault!
Countdown to 100$ oil (10) - Simmons says 300$ soon - and more
Countdown to 100$ oil (9) - I am taking bets
Countdown to 100$ oil (8) - just raw data
Countdown to 100$ oil (7) - a smart solution: the bike
Countdown to 100$ oil (6) - and the loser is ... Africa
Countdown to 100$ oil (5) - OPEC inexorably raises floor price
Countdown to 100$ oil (4) - WSJ wingnuts vs China
Countdown to 100$ oil (3) - industry is beginning to suffer
Countdown to 100$ oil (2) - the views of the elites on peak oil
Countdown to 100$ oil (1)