With both gas prices and Iran resonating on the campaign trail, President Barack Obama said recently there is enough oil is being produced worldwide (NYT) to proceed with Iran sanctions aimed at slashing the country’s oil revenue without suffering unbearable global oil price increases.
Since the most recent round of sanctions became law in December to deter Iran’s nuclear program, the White House has encouraged oil exporters with spare capacity to increase their production and discussed releasing strategic oil reserves in the event of a supply disruption with allies such as the United Kingdom.
In a March op-ed, GOP presidential frontrunner Mitt Romney said one way he would check Iran is by adding a military option to diplomacy that would include “restoring the regular presence of aircraft carrier groups in the Eastern Mediterranean and the Persian Gulf region simultaneously.” Republican candidate Newt Gingrich has based much of his campaign on bringing gas prices down to $2.50 per gallon through increased domestic production, discounting global demand as a price-driver.
Forbes’ Agustino Fontevecchia says the worst thing politicians could do is continue pressing for military action against Iran. “If there is an attack, oil prices would spike to their 2008 peaks and beyond, possibly to the $210 to $220 a barrel region, pushing the [United States], and probably Europe, back into recession,” while increasing oil companies’ profits, says Fontevecchia.
Financial Times columnist Martin Wolf writes that the Iranian sanctions — which Republicans support — are primarily to blame for the rise in gas prices and that the problem could be mitigated with lower U.S. consumption. “The world will be vulnerable to high oil prices and repeated shocks, so long as supply is stagnant, demand buoyant and unrest likely – in short, so long as it remains as it now is,” Wolf writes. “For the [United States], the best response would be to lower the oil-intensity of its economy, to reduce vulnerability to these shocks.”
Suggested Other Reading:
With prices at the pump are emerging as a significant U.S. election issue, CFR gathers five experts to discuss what to do about oil price volatility, offering a range of policy options, from lowering regulations to encouraging less consumption.
This CFR backgrounder looks at a number countries where supply instability that could greatly effect the oil market.
Saudi Arabia’s petroleum and mineral resources minister, Ali Naimi, wrote in the Financial Times that high oil prices are bad news for everyone, particularly the global economy.
Recent political appointments by Iranian supreme leader Ayatollah Khamenei could mean Tehran is coming around to the idea of negotiations with the U.N. Security Council, writes Mehdi Khalaji of the Washington Institute for Near East Policy.
CSIS’s Jon Alterman examines possible unintended consequences of military action against Iran.
— Gayle S. Putrich, Contributing Editor