Tags: Iran | Attack | Oil | Embargo

Iran Attack Would Be Worse for Oil Than ’70s Embargo: Shipping CEO

Monday, 05 Mar 2012 02:46 PM

Rising tensions in the Strait of Hormuz mean an increased risk of much higher oil prices, possibly worse than in the 1973 OPEC embargo, which nearly tripled the global oil price.

If there is an attack on Iran by Israel, one likely to draw in the United States, expect havoc, says Bob Bandos, president and CEO of Dubai-based marine logistics provider GAC North America, speaking to the International Business Times.

"That would be nothing compared to this," Bandos said, referring to the Arab embargo that led to U.S. consumers standing in lines to buy suddenly expensive gasoline.

Editor's Note: Wall Street Whistleblower Warns of Meltdown, See His Uncensored Interview

Inflation adjusted, gasoline cost U.S. buyers $3.54 in 1981, a peak already well behind us. Oil is trading at about $107 a barrel. Brent Crude is at almost $124 a barrel. U.S. regular gas is north of $3.71 a gallon.

Gas prices started the embargo era under $2 a gallon in current dollars.

Iran has said it could close the strait and block any oil from coming or going, some 17 million barrels a day. If good on its threat, “you're talking about millions and millions of barrels of oil that will not get out," Bandos said. "It's going to create more havoc on oil."

A car crash in Illinois that knocked out a major Canadian pipeline isn't helping matters. Two men died after crashing through a fence and hitting a pipeline in New Lenox, Ill. A firefighter also died and several people are critically injured.

The pipeline is to remain shut until at least Wednesday, according to media reports. The Enbridge pipeline supplies the U.S. Midwest and moves 318,000 barrels a day when operating.

Speculation is driving a lot of the price worries, say some experts, an effect egged on by problems in the Middle East.

If a barrel of crude oil is $23.39 higher because of speculative action in the commodity markets, this translates out into a premium for gasoline at the pump of 56 cents a gallon, according to calculations by Robert Lenzer at Forbes magazine.

“Since gasoline in the northeast is about $3.68 a gallon, this suggests that without any speculation, the cost of a gallon would be only $3.12, a lot more favorable outcome,” Lenzer writes.

Meanwhile, both India and Japan are nearing deals to cut their Iranian imports, in moves to placate U.S. demands to corner the regime over its nuclear ambitions but also to insulate their economies from a shock if Iran carries out its threat.

Iran is considering stopping oil sales to Belgium, the Czech Republic and the Netherlands, according to Iran’s state-run news agency.

The ramping up of tough language between Europe, the United States and Iran is not helping the country, warns President Barack Obama, who is in private discussions today with Israeli Prime Minister Benjamin Netanyahu over the current conflict.

"Now is not the time for bluster," Obama told reports, referring to sanctions that have dried up European purchases of Iranian oil exports. "Now is the time to let our increased pressure sink in."

Editor's Note: Wall Street Whistleblower Warns of Meltdown, See His Uncensored Interview

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