Global oil prices will double to more than $250 a barrel if Western economies impose a ban on Iranian oil exports, warned an Iranian government official on Sunday, 4 Dec.
"Imposing sanctions on oil and gas is among the sanctions that, if one wants to do that, the consequences should be fully considered before taking any action," said Iran’s Foreign Ministry spokesman Ramin Mehmanparast in a local newspaper interview as cited by Reuters.
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Mehmanparast’s comments came just days after the European Union imposed fresh new economic sanctions on 180 Iranian officials and firms last week, over Iran’s alleged attempts to acquire nuclear capabilities. But while the EU managed to agree on freezing the assets of the accused parties, they stopped short of any decision to halt the purchase of oil from the Islamic state.
"I do not think the situation in the world and especially in the West today is prepared enough to raise such discussions,” claimed Mehmanparast. "As soon as such an issue is raised seriously, the oil price would soar to above $250 a barrel.”On Friday, 2 December, the Brent posted a weekly gain of 3.3 percent, its highest weekly gain since October 14, as concerns grew over a possible disruption of oil flows from the second-largest OPEC producer.
China, the biggest buyer of Iranian crude, also stepped in to warn against any "emotionally charged actions" that might threaten global oil supply.
"China hopes that the relevant parties can remain rational, calm and restrained, to avoid emotionally charged actions that could intensify the dispute," said a Foreign Ministry spokesman, as quoted by Reuters.
The Russian government also had it say: warning that "cranking up a spiral of tension," would undermine the chances of Iran cooperating with efforts to ensure it does not build nuclear arms.
However both the US and the EU are said to be considering further action against Iran, with the EU expected to make a decision by its next meeting in January.
"No one welcomes the sanctions, we know that sanctions create obstacles, but we want to say we will overcome these obstacles," said Mehmanparast defiantly.
Oil analysts though have rubbished Iran's predictions as over-exaggerated.
"In the unlikely situation that oil exports were cut off then I still don't buy [the argument] that oil prices would double," said Robin Mills, an analyst at Manaar Energy Consulting to the Gulf News.
"Saudi Arabia would step in and increase production to cover for that. In theory, they could make up the entire loss of Iranian exports, which practically they wouldn't,” he added. "In the case that Saudi Arabia does not cover for any of the loss and all the Iranian exports are lost, as long as you assume that people don't panic, I estimate oil prices might go up to $150 a barrel."Mills also doubted whether the Iranian oil industry would be that badly affected over an oil embargo.
"There will always be a buyer using other financial mechanisms or other methods," he said. "The output may be reduced somewhat but not cut off entirely."Courtesy EW News Desk Team at Economy Watch, (EconMatters author archive here)
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