$90 Oil?

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If there’s one big reason why Bush said okay to giving Iran nuclear fuel, the threat in that title says it all…

From the Guardian:

Kona Haque, commodities editor at the Economist Intelligence Unit, said the worst case scenario of a shutdown of supplies from Iran would be ‘absolutely devastating … I wouldn’t be surprised to see the price go over $90 a barrel’. She said fears about Iran are already adding a $10 risk premium to oil prices, which could remain in place for months as the crisis escalates. Davoud Danesh-Jafari, Iran’s oil minister, has warned that the result of punitive action against his country would be ‘the unleashing of a crisis in the oil sector’.

‘The resumption of nuclear research by Iran is currently the market’s largest preoccupation,’ said BNP Paribas oil analyst Eoin O’Callaghan. He has pushed up his forecast for average oil prices this year to $65 a barrel because of geopolitical risk. He points out that the oil price rose more than 60 per cent in the run-up to the Iraq war; a similar increase now would take prices to $94.

Haque said that with little spare capacity in the market, prices are much more vulnerable to political shocks: ‘We need a lot more supply capacity to have a cushion; it’s going to take another couple of years until that happens.’

Like I’ve said before, Iran has us between an oil derrick and a hard place. And if we don’t start seriously investing in alternative sources to find oil and energy, we’ll have to bend to their requests time and time and time again.