Gas could hit $8 on Iran showdown

Gas could hit $8 on Iran showdown

Gas prices could double if Iran acts to close the Strait of Hormuz to oil-tanker traffic near the beginning of next year, cutting global economic growth by more than 25 percent, a leading energy-consulting firm says, USA Today reported.

Iran lacks the military might to close the strait for long, but it may be able to disrupt global oil supplies for up to three months by laying mines in the 6-mile-wide shipping passage that the U.S. and its allies would have to find and remove, analysts at IHS Global Insight said on a conference call with reporters Wednesday. About 17 million barrels of oil a day pass through the strait, or nearly 20 percent of the global market.

Brent crude oil prices could briefly hit $240 a barrel in the first quarter of 2013, said Sara Johnson, senior research director for Global Economics at IHS. Brent, the benchmark European oil, which IHS uses as a proxy for global prices, closed at $123.07 in London Thursday. In the U.S., West Texas Intermediate, the benchmark U.S. crude oil, closed at $105.35 a barrel.

Prices could stay as high as $160 in the second quarter before reverting to somewhere around $120, she said. The firm forecast that such an oil shock could bring back gas lines in much of the world, and shave global economic growth next year to 2.6 percent from a current forecast of 3.6 percent.

"If it did hit $240, you're looking at about a doubling of where gas prices are now," said Jim Burkhard, managing director of the global oil group at IHS CERA, the firm's energy-research arm. "And the U.S. is at $4."

Closing the strait probably wouldn't be in Iran's best interests, but its leadership often fails to act in ways that Westerners consider rational, said Farid Abolfathi, senior director of the IHS Risk Center. The firm's analysis assumes the strait would be closed at the start of 2013, as Iran reacts to pressure to stop development work on nuclear weapons.

Sheikh Sabah al-Ahmad al-Sabah, the ruler of Kuwait, said on state media Tuesday that Iran had assured its neighbor it would not close the strait, despite its public threats to do so.

IHS' energy-related forecasts attract attention because of the reputation of Daniel Yergin, chairman of the IHS CERA division, formerly known as Cambridge Energy Research Associates. Yergin's books include the best-seller The Quest, about the evolution of energy markets since the end of the Cold War, and 1993's The Prize, a Pulitzer Prize-winning history of the oil industry.

The firm's outlook is gloomier than some economists' assumptions. In an interview earlier this month, Moody's Analytics chief capital markets economist John Lonski said U.S. gasoline prices would reach $4.75 a gallon if Iran closed the strait.

The impact would be so large because global oil supplies are so tight, said Burkhard. The world has only 1.8 million to 2.5 million barrels a day of unused production capacity, down from 6.2 million in 2009.

Tight inventories magnify the impact of any interruption in crude from nations around the strait, he said. Much Iranian crude has already been taken off world markets because of international sanctions.

If gas prices doubled, consumers could spend an extra $145 a month for gasoline, said Nigel Griffiths, chief economist at IHS Automotive.


Edited by: S. Isayev

Tank units of Azerbaijani Armed Forces perform tasks within scheduled exercises (VIDEO)
Tank units of Azerbaijani Armed Forces perform tasks within scheduled exercises (VIDEO)
Azerbaijan shares data on number of vaccinated citizens for May 16
Azerbaijan shares data on number of vaccinated citizens for May 16
Azerbaijan confirms 472 more COVID-19 cases, 1,122 recoveries
Azerbaijan confirms 472 more COVID-19 cases, 1,122 recoveries
Loading Bars
Latest
Bitcoin rises 5.6% to $49,337.72
UK records another 1,926 coronavirus cases, 4 deaths
Tourism Administration to participate in Dubai Tourism Exhibition
Iran to vaccinate 14m citizens against COVID-19 by end of June: Minister
Uzbekistan and Tajikistan discuss the development of trade and economic ties
Value of Turkish cars imported by China surges
Azerbaijan using combat aircraft units in military exercises (VIDEO)
Azerbaijani grabs gold at 2021 US Judo Senior National Championships (PHOTO)
Ankara Commission investigating crimes committed during Karabakh war holds first meeting (PHOTO)
Tank units of Azerbaijani Armed Forces perform tasks within scheduled exercises (VIDEO)
Azerbaijan’s Diamond Motors company names winner of tender for purchase of vehicles
Iran kicks off operation to develop Kong fishing port in Hormozgan Province
Political parties in Armenia urge to oust active PM and president
Iran's Energy Exchange announces products to be on sale on May 17
MP explains Iran's benefits of selling oil products instead of crude
Slovenian Port of Koper could serve as fastest way and entry point for Georgian goods entering EU
Rising commodity prices create preconditions for potential strengthening of currencies in CIS - expert
Azerbaijan names number of sold cars in 1Q2021
Azerbaijan discloses volume of non-oil products exported to Turkey
Azerbaijani Army's missile, artillery units heading for exercise areas (VIDEO)
Bahar Azadi gold coin price rising in Iran
National Iranian Drilling Company starts drilling operations on Siyah Makan oil field
French investment bank to assist in transformation of state-owned enterprises in Uzbekistan
Khazar consortium opens tender for purchase of office equipment in Turkmenistan
Udi people always feel attention of Azerbaijani president, first lady - head of Albanian-Udi Christian community
Azerbaijan's economy shows positive tendencies in March 2021, says WB
Travel to Saudi Arabia to resume Monday after year of restrictions
Royal Caribbean cancels new cruise line from Israel over unrest
Cargo movements in Iran’s Amirabad port shrink
Ranking of best-selling cars in global market for 1Q2021 announced
Bolivia receives another batch of Russia’s Sputnik V vaccine
Turkmen Communications opens tender for supply of equipment
Iran exporters seek stable foreign currency rate
Azerbaijan discloses date of next plenary parliamentary session
Personnel, military equipment of Azerbaijani Armed Forces sent to exercise area (PHOTO)
First Armenian president reveals reasons for country’s defeat in Karabakh war
Iran’s NIOC, POMC to sign contract on development of Farzad B gas field
Activities in Iran’s Noshahr port intensify
Greece talks latest trade data with Turkmenistan
Azerbaijan shares data on number of vaccinated citizens for May 16
Kazakhstan boosts trade with Poland
Azerbaijan confirms 472 more COVID-19 cases, 1,122 recoveries
Azerbaijani manat's exchange rate remains stable - WB
Kazakhstan unveils its trade structure with EAEU countries for 1Q2021
Greece exploring ways to further diversify bilateral trade with Turkmenistan
Iran's Ministry of ICT to provide free internet for presidential candidates
Iran lifts steel ingots export ban
Azerbaijan, Germany implementing joint agricultural projects
Iran declares amount of loans issued in Fars Province
Detailed look at Turkmenistan's development of agriculture sector (2020 - May 2021)
Tourism potential of Azerbaijan's liberated Shusha at int'l exhibition in Dubai (PHOTO)
Ports and Maritime Organization of Iran seeks tax exemption for Chabahar port
Azerbaijan discloses insurance fee for rice fields
Abu Dhabi shares at record high, shrugging off Israel-Palestine tension
Israel's import of Turkish chemicals spikes in value
SOCAR Ukraine temporarily suspends premium fuel sales
Britain to hold meeting to encourage global COVID vaccine take-up
Azerbaijani agrarian agency signs tender to attract judicial services
Purchasing of rapeseed from farmers in Iran continues
CPI up 0.3% in April, well below expectations
Uzbekneftegaz shares data on shipment of sulfur products
Russia’s COVID-19 spread rate surpasses 1 for eight days in a row
Disney World and other U.S. theme parks update mask rules
Troops of Azerbaijan's Nakhchivan garrison to launch new command-staff exercises
Share of non-performing loans in Georgia doubles
EU allocates financial aid for programs in support of Georgian private sector
Government Trading Corporation of Iran unveils volume of wheat purchased from farmers
Iran's free trade zones require private sector investments - President Rouhani
Volume of cargo loaded, unloaded in Iran’s Anzali port decreases
Azerbaijani parliamentary delegation leaves for visit to Italy
Bitcoin rises 5.6% to $49,337.72
Most temples belonging to Udi people are either in ruined or dilapidated condition. Therefore, we will restore them too - President Aliyev
Iran's launches supercomputer
Proxy advisor ISS recommends votes for Chevron CEO, directors
WB talks growth of lending to Azerbaijan's economy
Saudi Arabia's national airline to resume flights to Georgia
Uzbek commodity exchange notes decrease in prices for cotton seeds
Udi people have great historical heritage - President Aliyev
Georgian FM to pay official visit to Kyiv
Iran’s East Oil & Gas Production Company boosts gas extraction
Biggest share of Azerbaijan's GDP accounts for industry
Turkmenistan interested in expanding co-op with Russia’s Lipetsk region
Azerbaijani Armed Forces continue exercises, moving to operational areas (VIDEO)
Georgia sees increase in COVID-19 cases
Iran reveals COVID-19 data for May 16
Russian airline expanding route of flights in direction of Baku
Azerbaijan expected to approve another int'l document on migration issues
Iran government increases pensions
Retail trade indicators up in Kazakhstan
Physical volume of Kazakhstan’s GDP down in 1Q2021
Turkmenistan, Iran talk over increasing sea transportation in Caspian Sea
Ministry talks social benefits paid out to population in Azerbaijan since early 2021
GDP per capita increases in Azerbaijan
Azerbaijan discloses amount of trade surplus for 1Q2021
Azerbaijan creating industrial clusters to develop metallurgical industry
Facilities to be put into operation at Iran's Ilam Airport
Fitch Ratings shares forecast for Azerbaijan's 2021-2022 external public debt
Baku Higher Oil School hosts webinar ‘Women in Engineering: Challenges and Opportunities’ (PHOTO)
Batumi International Airport of Georgia receives first passenger flight after reconstruction
Azerbaijan's Azerishig to purchase metal structures
All news