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Roubini: Attack on Iran Would Send Oil to $200, Spark Recession
An attack on Iran would send oil prices as high as $200 a barrel and threaten to push the world back into recession, says New York University economist Nouriel Roubini.
Tensions have been building between the West and Tehran over the latter's nuclear ambitions, and concerns are brewing that Israel may be mulling an attack on Iran despite calls from the U.S. to give sanctions a chance.
"If there's an effect on the supply of oil and gas from the Gulf, and production and exports from Iran go for a while to zero, oil could go to $170, $180, $200 a barrel," Roubini tells Foreign Policy magazine.
"If you think about the last three major global recessions, there were all caused by a geopolitical shock in the Middle East that led to spike in oil prices," Roubini adds, referring to the Yom Kippur War in 1973 the Iranian revolution in 1979 and the 1990 Iraqi invasion of Kuwait, all of which contributed to global economic contractions.
Currently, WTI is trading at around $106 a barrel while its European counterpart, Brent, is trading over $125, an historically wide spread between the two blends.
Even if war is avoided, tensions alone are going to push up oil prices, which will take U.S. gasoline prices up with them and dampen the economy.
"I would not underestimate the effect of gasoline today, in a number of U.S. states, being already at $4.00 a gallon and it could be so in many other states. Psychologically, once you're above the $4 mark, it has an impact on consumer confidence," Roubini says.
Prices rise during the U.S. summer anyway, when driving increases and refineries switch to pricier inputs.
"The higher those oil prices are, the higher the chance that has a negative effect on consumer confidence, on disposable income, and on the economy. And it's not just in the U.S. the price of oil is very high in Europe and in many other parts of the world," Roubini says.
High gasoline prices are eating away at President Barack Obama's popularity, something the president himself admits.
"As long as gas prices are going up, people are going to feel like I'm not doing enough, and I understand that," Obama tells WFTV in Orlando, Fla.
Roubini: Attack on Iran Would Send Oil to $200, Spark Recession
An attack on Iran would send oil prices as high as $200 a barrel and threaten to push the world back into recession, says New York University economist Nouriel Roubini.
Tensions have been building between the West and Tehran over the latter's nuclear ambitions, and concerns are brewing that Israel may be mulling an attack on Iran despite calls from the U.S. to give sanctions a chance.
"If there's an effect on the supply of oil and gas from the Gulf, and production and exports from Iran go for a while to zero, oil could go to $170, $180, $200 a barrel," Roubini tells Foreign Policy magazine.
"If you think about the last three major global recessions, there were all caused by a geopolitical shock in the Middle East that led to spike in oil prices," Roubini adds, referring to the Yom Kippur War in 1973 the Iranian revolution in 1979 and the 1990 Iraqi invasion of Kuwait, all of which contributed to global economic contractions.
Currently, WTI is trading at around $106 a barrel while its European counterpart, Brent, is trading over $125, an historically wide spread between the two blends.
Even if war is avoided, tensions alone are going to push up oil prices, which will take U.S. gasoline prices up with them and dampen the economy.
"I would not underestimate the effect of gasoline today, in a number of U.S. states, being already at $4.00 a gallon and it could be so in many other states. Psychologically, once you're above the $4 mark, it has an impact on consumer confidence," Roubini says.
Prices rise during the U.S. summer anyway, when driving increases and refineries switch to pricier inputs.
"The higher those oil prices are, the higher the chance that has a negative effect on consumer confidence, on disposable income, and on the economy. And it's not just in the U.S. the price of oil is very high in Europe and in many other parts of the world," Roubini says.
High gasoline prices are eating away at President Barack Obama's popularity, something the president himself admits.
"As long as gas prices are going up, people are going to feel like I'm not doing enough, and I understand that," Obama tells WFTV in Orlando, Fla.
Roubini: Attack on Iran Would Send Oil to $200, Spark Recession
