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Speculating on Oil and Iran
Posted by: Jon Henke on Wednesday, April 19, 2006

Ezra Klein suggests that Iran is planning to use the oil weapon...
Iranian president Mahmoud Ahmadinejad greeted yesterday's record oil prices with a nonchalant musing about how undervalued petroleum actually is. "The global oil price," he said, "has not reached its real value yet. The products derived from crude oil are sold at prices dozens of times higher than those charged by oil-producing countries."

Step 1: Grab America's testicles. Step 2: Swiftly squeeze.
I don't doubt that he's right. Iran has one economic weapon, but it's a major one. They know that and I've little doubt that they will use it....rhetorically.

I'm not sure it will go much further than that, though — at least, not for now. China, on whom the Iranians are banking for weapons and that Security Council Veto, is even more sensitive to high gas prices than is the United States.
To generate every US$1 of GDP, China uses three times or more as much energy as the global average, 4.7 times higher than in the U.S., 7.7 times higher than in Germany and 11.5 times higher than in Japan.
To date, China has not supported sanctions against Iran precisely because they worry that sanctions would either (a) lead to supply disruptions, or (b) put China out of favor with Iran for oil deals. However, if Iran continues to drive oil prices higher anyway, China — with their low oil-per-output ratio — may just discover that sanctions don't carry such a high cost after all.

On the other hand, Russia — which holds the other difficult Security Council veto — probably loves these oil prices.
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Previous Comments to this Post 

Try this sentence.

The global wheat price has not reached its real value yet. The products derived from wheat are sold at prices dozens of times higher than those charged by farmers.

This is just talk. Using the oil weapon will slit his own throat in the process considering how little advanced the Iranian economy is besides oil.
Written By: Shadow Hunter
URL: http://
This is a very important point. I remember back many months ago when some people were grumbling about the way the Chinese (and India) were getting in bed with Iran. On reflection, I realized that this was probably a Good Thing because it actually puts Iran on a shorter leash. If they do anything to tick off the Chinese — and using the oil weapon would be the surest and quickest way to do that — they lose their most important protector. Russia doesn’t have too much of a stake in this either way, so they can probably be persuaded to step out of the way.

So yeah, Iran really doesn’t have us over an oil barrel the way they’d like, and we have China to thank for that. Welcome to the interconnected world.
Written By: Matt McIntosh
The worst-case scenario for Iran is not that the U. S. unites the rest of the world around sanctions (nor a U. S. attack). The worst-case scenario, as Shadow Hunter intimates, is that Iran unleashes a threatened boycott against the U. S. to no appreciable effect.
Written By: Dave Schuler
The aide to the top Iranian Nuclear negotiator is in the US on a "mystery" mission. "The appeals came on the back of the US state department confirming that Mohammad Nahavandian, an economics and technology aide to Iran’s top nuclear negotiator Ali Larijani, was in Washington. But the department would not say how he got into the country or what he was doing there."

And what was the top Iranian nuclear negotiator doing in January?
" Iran’s top nuclear negotiator, Supreme National Security Council Secretary Ali Larijani, is in Beijing on a key mission to secure China’s support in the growing diplomatic storm over Iran’s nuclear program. Tehran is struggling to avoid having the matter brought before the UN Security Council, which could impose sanctions because of suspicions that Iran is trying to develop nuclear weapons. Larijani arrived in China from Russia, where he seemingly won Moscow’s support for keeping the debate within the UN International Atomic Energy Agency (IAEA).

And who is visiting Washington this week?
"Chinese President Hu Jintao toured a Boeing Co. aircraft plant on Wednesday, on the eve of a summit with President Bush, where he will be pressed to cut China’s trade surplus with the United States."

A coincidence, eh?

Written By: Dale
URL: http://
Can we use nuclear power, now?
Written By: jpm100
URL: http://
I don’t know how Iran exports most of her oil, but if they are using and sea routes, they could be in for a surprise if we decided to establish an oil embargo.

Who would go down faster? The country that relies on that one commodity to export or the one that would face steeper prices for a while?

If at the same time we set up an floating oil tax (like econpundit wants) it would even be a one-off for the USA.

Written By: Harun
URL: http://

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