longbrained
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What Happens if Iran Doesn't Back Down?
What Happens if Iran Doesn't Back Down?
By James Hamilton
If an embargo is successful in preventing Iran from selling a significant amount of oil on the world market, what would replace it?
On Friday the White House released the following statement:
That the President or anybody else is counting on the world demand for petroleum curve to shift left in 2012 seems doubtful. And which are the countries from which increased production is anticipated? Libyan production averaged only 500,000 barrels/day in 2011, and if things go well could soon be producing a million barrels more than that daily. In the meantime, disruptions in Sudan, Syria, and Yemen have taken out a separate 640,000 barrels/day. The best hope is perhaps Saudi Arabia, which presumably has been making private statements to U.S. officials similar to this public statement from Saudi Oil Minister Ali Naimi last Wednesday:
Where have we heard something like that before? Maybe this statement from June 2004 rings some bells:
Or perhaps this one from August 2004:
Just for fun, here's a graph of actual Saudi production in the years following those statements, with the date of the second quote above noted by a vertical line.
Saudi Arabian crude oil production, monthly, in thousands of barrels per day, Jan 1994 to Dec 2011. Includes lease condensates but excludes natural gas plant liquids and refinery processing gain. Vertical line at August 2004. Data source:EIA.
And in case you've been hiding in a hole for the last few years, here is what actually happened to the price of oil after those words. To help your imagination, I've also drawn a horizontal line at $28, the upper end of the price range referred to.
Price of West Texas Intermediate, dollars per barrel, monthly, Jan 1994 to Dec 2011. Vertical line at August 2004 and horizontal line at $28/barrel. Data source: FRED.
Moving along through the President's list of alternatives in the first quote above, what about a release from strategic stockpiles? This may well happen, but it's obviously only a temporary stopgap. I'm therefore inferring that Plan A is the embargo successfully shuts down Iranian exports, the world gets by for a short while on releases of strategic reserves, the Iranians cry "uncle" within a few months, and President Obama enjoys a great diplomatic success.
I guess my only question is what does Plan B look like?
What Happens if Iran Doesn't Back Down?
By James Hamilton
If an embargo is successful in preventing Iran from selling a significant amount of oil on the world market, what would replace it?
On Friday the White House released the following statement:
That the President or anybody else is counting on the world demand for petroleum curve to shift left in 2012 seems doubtful. And which are the countries from which increased production is anticipated? Libyan production averaged only 500,000 barrels/day in 2011, and if things go well could soon be producing a million barrels more than that daily. In the meantime, disruptions in Sudan, Syria, and Yemen have taken out a separate 640,000 barrels/day. The best hope is perhaps Saudi Arabia, which presumably has been making private statements to U.S. officials similar to this public statement from Saudi Oil Minister Ali Naimi last Wednesday:
Where have we heard something like that before? Maybe this statement from June 2004 rings some bells:
Or perhaps this one from August 2004:
Just for fun, here's a graph of actual Saudi production in the years following those statements, with the date of the second quote above noted by a vertical line.
Saudi Arabian crude oil production, monthly, in thousands of barrels per day, Jan 1994 to Dec 2011. Includes lease condensates but excludes natural gas plant liquids and refinery processing gain. Vertical line at August 2004. Data source:EIA.
And in case you've been hiding in a hole for the last few years, here is what actually happened to the price of oil after those words. To help your imagination, I've also drawn a horizontal line at $28, the upper end of the price range referred to.
Price of West Texas Intermediate, dollars per barrel, monthly, Jan 1994 to Dec 2011. Vertical line at August 2004 and horizontal line at $28/barrel. Data source: FRED.
Moving along through the President's list of alternatives in the first quote above, what about a release from strategic stockpiles? This may well happen, but it's obviously only a temporary stopgap. I'm therefore inferring that Plan A is the embargo successfully shuts down Iranian exports, the world gets by for a short while on releases of strategic reserves, the Iranians cry "uncle" within a few months, and President Obama enjoys a great diplomatic success.
I guess my only question is what does Plan B look like?
