The US and European embargo of Iranian oil is one of the factors behind the stubbornly high price of crude, trumping the huge slump in petroleum demand in the US. Although Iranian oil exports are down 33%, Iran is on a course for its third largest oil-related earnings ever. Thus, the primary beneficiary of high oil prices is Iran.
Rather than blame himself for the absurdity of the situation, president Obama blames oil speculators.
High Oil Prices Shield Iran From Sanctions
The Financial Times reports High Oil Prices Shield Iran From Sanctions.
The Centre for Global Energy Studies (CGES), a London-based think-tank, estimates that Iran will earn $56bn selling its crude this year – its third-highest earnings ever – even after factoring in the loss of roughly a third of its export volume due to sanctions.
Washington has imposed sanctions to penalise foreign financial institutions dealing with Iran’s central bank, while Brussels has approved a full embargo on Iranian crude oil starting formally from July 1.
The western allies are trying to achieve a difficult balance: hurt Iran enough to force it to negotiate over its nuclear programme, but keep enough oil flowing to avoid a price spike that damages the fragile economic recovery.
“The sanctions are not working,” said Olivier Jakob, head of the Swiss-based oil consultancy Petromatrix, in a note to clients. “They are definitely hurting Iran as it limits its [crude oil] exports, but they are also hurting the rest of the world, given that the western powers have not managed to control prices.”
Iran has had a hard time repatriating those earnings but Iran’s president, says Tehran has enough savings to survive until 2015. “We have as much hard currency as we need, and the country will manage well, even if we don’t sell a single barrel of oil for two or three years.”
It’s difficult to know if that is a bluff or reality. However, artificially high oil prices are certainly not helping the global economy.
Obama Blames Oil Manipulators
Please consider Obama proposes steps to curb oil market manipulation
Facing heat for high gasoline prices, President Obama tried to shift the focus to Congress, Republicans and energy traders, calling for legislation that he said would “put more cops on the beat” to crack down on potential manipulation of the oil market.
Obama called on Congress to provide more money for regulators and increase penalties for market manipulators. The president, flanked by Treasury Secretary Timothy F. Geithnerand Atty. Gen. Eric H. Holder Jr., suggested that traders and speculators are affecting the price of oil and digging into Americans’ pocketbooks.
“We can’t afford a situation where some speculators can reap millions while millions of American families get the short end of the stick,” Obama said in brief remarks in the Rose Garden on Tuesday. “That’s not the way the market should work.”
Who is the Real Manipulator?
Multiple ironies abound in Obama’s lecture about “market” forces.
Besides Obama’s own influence on the price of oil, the Fed artificially holding interest rates low is “not the way the market should work” either.
The very idea that 10 alleged wizards can sit in a room eight times a year and divine the proper interest rate to steer the economy is preposterous. Indeed that is precisely “not the way the market should work” and in fact cannot possibly work.
Proof is easy to find. We have had bubble after bubble after bubble, each with increasing amplitude, each with bank bailouts, each causing greater and greater income disparity, and ultimately culminating in the biggest housing bust in history.
History proves there have are no wizards on the FOMC, only economic and academic jackasses. Yet eight times a year, those jackasses sit in a room and set policy. Worse yet, they are arrogant enough to believe they, not the market, know what is best for the economy.
Then to top it off, we have to listen to an Obama lecture on the market when it is his own policies coupled with inane Fed policies that are the real cause of high oil prices.
Mike “Mish” Shedlock
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