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Juan Cole

Juan Cole

Juan runs the popular geopolitics blog Informed Comment where he provides an independent and informed perspective on Middle Eastern and American politics.

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Why is the Washington Post Surprised at High Gas Prices?

The Washington Post is surprised by the ‘mysterious’ high cost of gasoline in the US but does not mention in this article that the US government, at the insistence of the Israel lobbies, reduced Iran’s petroleum exports by 40% in 2012 by strong-arming countries to leave it in the ground and not import it on threat of third-party US sanctions.

Petroleum prices are at near-historic highs this winter. The average for gasoline in the US has jumped to $3.75 and it is much, much higher in Europe. The price of petroleum as a primary commodity is not a very complicated calculation– it is just supply and demand. The world is producing roughly 90 million barrels a day of oil. The world wants all of that and more, and hence the price is high. If Iran’s one million barrels a day — which the US has forced countries in Europe and elsewhere not to buy– were on the market, the price would be less. (There is a little twist in that sulphur-heavy, ‘sour’ crude is more expensive to refine into gasoline, so taking ‘light sweet’ oil off the market and trying to replace it with sour crude from e.g. Nigeria is costly).

Related article: Americans Paying European Prices for Oil?

Ironically, the high petroleum prices produced in part by the blockade of Iran oil sales cushion Iran’s government from the sanctions, since what oil it does sell goes for high prices and feathers the ayatollahs’ nests. Over time, some Iranian exports may be taken over by the private sector, which is not subject to the same sanctions as the government-owned enterprises.

The Neoconservatives behind the largely congressionally-led financial blockade against Iran’s oil exports (mandated by last year’s National Defense Authorization Act) promised that the policy would not harm the American economy because Saudi Arabia would be willing to pump extra petroleum to cover the Iranian shortfall. The Saudi ability to replace Iranian exports in the medium to long term, however, is doubted by many analysts, and Saudi exports fell slightly in the last quarter of 2012 from last summer’s heights. There was also a strike at a plant in Libya, and continued security problems for exports in northern Iraq. Not to mention that Syria and South Sudan exports have been halted by political upheaval, and that technical problems reduced the UK’s North Sea production.

Related article: Where Do Your Gas Dollars Go?

Moreover, world demand is not stable, as the Neocons appear to have thought, and the prospect of an economic upturn in Asia this year will cause more petroleum to be used, increasing demand and magnifying the effect of the reduction of Iranian exports. Even the expectation of an upturn puts prices up on speculation.

Having West Texas crude go for nearly $100 a barrel is certainly a drag on the US economy, and as WaPo notes, it is hurting a lot of American workers and businesses. Polls show that drilling for oil in the US, even with environmentally dubious methods such as hydraulic fracturing, is popular with the US public. What they don’t seem to realize is that our sanctions on Iran are the same as closing down a sixth of US production.

Why WaPo and many other American news sources more or less cover up the effect of the US war on Iranian petroleum exports in keeping world oil and gasoline prices high is what is mysterious to me.

By. Professor Juan Cole


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Leave a comment
  • bmz on February 21 2013 said:
    Cole suggests that all this has produce deficient oil supplies for the US. But all he had to do was check DOE data to see that we now have record oil supplies; which totally belies his arguments.

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