Iran accepts U.N. investigation of nuclear program
Gas prices in San Rafael, CA soar above $4, following recent price surges nationwide. As tensions with Iran continue over it's alleged nuclear program, global oil supply and prices remain uncertain.
Jeremy Hobson: The top nuclear official at the United Nations said today that a deal has been reached with Iran to allow the UN’s investigation into Iran’s nuclear program to continue. This comes ahead of tomorrow’s talks with six world powers and Iran; also one of those six world powers is the United States. So what does all this mean for the price of oil, which spiked earlier this year because of tensions with Iran?
For answers, let’s bring in Juli Niemann. She’s an oil and gas analyst with Smith, Moore & Company, and she’s with us live as always from St. Louis. Good Morning.
Juli Niemann: Good Morning, Jeremy.
Hobson: So Juli, what do you make of this potential progress that a deal has been reached to allow the U.N.’s investigation into Iran’s program to continue?
Niemann: Well, Iran has been playing the Korean game – a big game of chicken. You head for a huge head-on collision, you swerve at the last minute. They were talking about if you go through the European sanctions, which start July 1st, you’re going to go to $160 a barrel. So now they are making conciliatory noise as kind of a cool down.
Hobson: What does this mean for the global oil supply? How important is Iran in that regard?
Niemann: Well, the world can’t afford to lose Iranian production. Saudi Arabia says, ‘yes, we’ll produce to full tilt if this goes through.’ European and USA will open up the strategic reserves, but those have limits. So it is important production, but you can’t fight the markets at this point.
Hobson: Juli, what do you expect this summer to happen with oil prices?
Niemann: Well demand globally has stalled. Europe is in recession. We have about a two percent growth rate right now in the U.S. There’s flat oil demand, and China is slowing down. Basically, there really is not huge supply problem at this point. Gasoline, for those who can afford to drive, you’re still going to see declining prices because we have plenty of inventory. Except for production problems of the West Coast, the rest of the United States can be looking forward to a summer of lower gasoline prices.
Hobson: Yeah, they really haven’t lowered out here in California. Juli Niemann, analyst at Smith, Moore & Company, thanks a lot.
Niemann: You bet.