Spooked - Tension over Iran is helping to push up oil prices once more

[gravity]

Mar 28th 2007 | NEW YORK
From Economist.com

SINCE prices peaked in July last year, and drifted steadily back down, analysts and consumers alike have been hoping that the painful days are behind them. No such luck. Late in January the cost of a barrel of crude fell to $50 or so, as an unusually warm winter allowed inventories to build. In the past couple of months, however, it has been steadily creeping higher. On Tuesday March 27th prices shot up by more than $5, touching $68.09, as escalating tension between the West and Iran over the kidnapping of 15 British sailors sparked fears of a military clash in the Gulf.

The spike was temporary, but prices remain at a three-month high of about $63 (see chart below). A war with Iran is not particularly likely, but even the faintest possibility is unsettling. Disruptions to Iran’s big oil fields, and possibly to Iraq’s, would be bad enough. But threats to close the Strait of Hormuz, through which roughly a quarter of the world’s oil supplies passes, send shivers through oil markets.

Oil traders already have reason to feel nervous. Big producers in the Middle East and elsewhere are plagued by security woes. The bigger concern with Iran is how to tackle its nuclear programme, the source of long-term tension. Iraq looks as unstable as ever, and America’s Congress is trying to fix a deadline for the withdrawal of American soldiers. PDVSA, Venezuela’s state-run oil company, announced a sharp fall in 2006 profits on Tuesday, perhaps a sign that a lack of investment in the industry may be eroding the country’s productive capacity. And there are anxiety-inducing predictions for this year’s hurricane season in the Gulf of Mexico.

The impact of the bad news has been exacerbated because supplies were already tightening. OPEC producers, whose governments have grown reliant on high prices to shore up their domestic political support, have been keen to keep the cost of a barrel of oil above $50. And demand in the 30-odd developed nations that make up the Organisation for Economic Co-operation and Development (OECD) has been unexpectedly strong. The latest report from the International Energy Agency, which monitors stockpiles, suggests that OECD inventories fell by 8.6m barrels in January, as eager consumers drew down the supplies amassed during the warm days of early winter. As inventories are cut, the effect of bad news is likely to be felt more quickly.

More: http://www.economist.com/daily/news/displaystory.cfm?story_id=8917102

[AndyA]

1. They are all opportunists. It doesn't matter what happens, if they can use it to drive up the cost

of the gas we pay, they'll do it.

I paid $37 to fill up my car this morning with premium, and it had over a quarter of a tank to start!

I hope the Dems hurry up and look into the Bush/Cheney "Let's make the oil companies richer" Energy Policy, there should be some fun things in there!

[obaman08]

2. Exactly..

n/t