Thursday, March 15, 2012

Experts Say Attack On Iran Could Mean $6 Per Gallon Gasoline

GOP presidential candidate Newt Gingrich has promisedthat if he wins the White House gasoline price will drop to $2.50 or even $2 per gallon. The former House Speaker also said that as president, he’d support (and join) an Israeli military attack on Iran’s nuclear facilities. Indeed, Gingrich said recently that “the red line is now,” referring to the point at which Iran’s nuclear program has progressed far enough to warrant military strikes.

Price economists have said that a promise to bring down gas prices to that level would be nearly impossible. But aside from that reality, the Hill newspaper reports that oil experts say that an Israeli attack would probably cause gas prices to rise significantly:
An Israeli military strike against Iranian nuclear enrichment sites would spike gas prices to between $5 and $6 per gallon, according to market analysts. [...]
I think you will see $5 and $6 dollar a gallon gas,” said Andrew Lipow, president of Lipow Oil Associates.
Other analysts agreed that airstrikes would cause a spike in global crude oil prices, and a corresponding jump in U.S. gasoline prices that are currently averaging $3.82-per-gallon. But some declined to predict how large that spike would be.
Indeed, the Council on Foreign Relations released a brief last month (PDF) by oil market analyst Robert McNally of the Rapidan Group looking at how rising tensions with Iran — including a possible military strike — could affect global oil markets. McNally writes:
A military attack by Israel or the United States on Iran’s nuclear facilities would likely lead to a sudden price shock (about $23 per barrel in the first days should Israel strike according to a Rapidan Group survey of market participants) as traders priced in risk of a wider conflict.
If Iran’s energy export infrastructure remains in tact and disruption of the crucial oil transit point at the Strait of Hormuz (which Iran has already threatened to shut in the face of sanctions) is minimal, the price spike would be up about $11 per barrel after 30 days. Were there a prolonged disruption where the International Energy Agency countries opened up their reserves, prices would settle at a $39 per barrel bump after a month. If those reserves remained off the market, a $61 bump can be expected, with at least one of the market participants surveyed responding that the spike could nearly triple the price of a barrel.
President Obama has warned about the dangers of Iran acquiring nuclear weapons, including undermining the nonproliferation regime, endangering regional security and risking a bomb falling into the hands of terrorists. But he also stressed just last weekend that “an opportunity still remains for diplomacy — backed by pressure — to succeed.”

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