Iran oil blockade unlikely to go through

Stephen Beard Dec 28, 2011

Adriene Hill: Iran has repeated its threat to block the Straight of Hormuz where about a fifth of the world’s oil passes through. The country is upset by international warnings of further sanctions over nuclear plans. This morning, Saudi oil officials are promising to pump more crude if Iran follows through on the threat. But would it be enough to keep oil and gas prices stable?

Marketplace’s Stephen Beard reports.

Stephen Beard: Halting, or even dislocating, the flow of one-fifth of the world’s oil supply could send the price of crude into the stratosphere. But the oil market doesn’t appear to take the threat seriously. The U.S. Fifth fleet is stationed in the Gulf, largely in order to ensure the waterway is kept open.

The markets also seem to be shrugging off the prospect of extra sanctions against Iranian oil exports. They could be disastrous for gas prices, says Manouchehr Takin of the Centre for Global Energy Studies.

Manouchehr Takin: The price of oil will be several hundred dollars a barrel. I think it will be like shooting oneself in the foot for the United States, for industrialized countries. And for the poor developing countries.

Saudi Arabia could supply extra oil to make up any shortfall from Iran, but the Saudis oppose the use of oil sanctions, and they’ve been privately arguing against their imposition on Iran.

In London, I’m Stephen Beard for Marketplace.

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.