Matt Badiali in The New York Times: Iran Sanctions and Oil Prices: Who’ll Feel the Pain
I am always thrilled when I get the opportunity to speak with such esteemed publications. Last week, I had the pleasure of interviewing with Clifford Krauss from The New York Times about Iran’s oil sanctions and what they mean for oil prices.
Since renewed American economic sanctions against Iran took effect last Monday, many of the world’s oil producers are uncertain about how the sanctions will affect business and top consumers worry about costs.
President Tump’s sanctions on Iran are in efforts to pressure the country into curbing its political and military activities across the Middle East and curb nuclear efforts.
In Krauss’ article Iran Sanctions and Oil Prices: Who’ll Feel the Pain, he explains what sanctions are, what they do, how the markets have reacted so far, and what the effect is on consumers and prices at the pump.
So far, the results have been benign. In fact, gas prices have been decreasing at the pump even after the renewed sanctions were announced.
What do the oil sanctions on Iran do?
Ultimately, the oil sanctions against Iran force companies to choose between doing business with Iran or the United States. Since the U.S. has a bigger economy and a more lucrative market, companies are persuaded to choose American oil over Iran. This is meant to be a message to Tehran to change their ways in other aspects regarding the Middle East and nuclear weapons, or face the economic consequences.
How Has the Oil Market Reacted So Far?
Since the imposition of oil sanctions on Iran, the oil market has been surprisingly resilient. We have seen gas prices at the pump fluctuate in normal fluctuations and even saw lower prices towards the end of last week, following the announcement of the renewed sanctions.
However, consumers should be aware that the lower prices will not stick around. The response so far is surprising giving that Iranian oil exports have dropped down to around 1.3 million barrels a day, from 2.4 million last spring. And as I told Krauss and The New York Times, I predict that the sanctions will shave off another 900,000 barrels over the next year. Sanctions would cut roughly 2 percent of global oil supplies.
All in all, we may see gas prices increase by next summer when driving season is in full-swing.
Read the full New York Times article on Iran Sanctions and Oil Prices for a more in-depth analysis.