What happens to the price of oil if we attack Iran?
On Saturday, John Robb over at Global Guerrillas had a post that got me thinking: What happens to the price of oil if the U.S. strikes Iran? I contacted John to ask him that question. The bottom line? Taking Iran off-line would push prices to $130 or $140 per barrel. Here's John's complete response: The market as it is ...
On Saturday, John Robb over at Global Guerrillas had a post that got me thinking: What happens to the price of oil if the U.S. strikes Iran? I contacted John to ask him that question. The bottom line? Taking Iran off-line would push prices to $130 or $140 per barrel. Here's John's complete response:
On Saturday, John Robb over at Global Guerrillas had a post that got me thinking: What happens to the price of oil if the U.S. strikes Iran? I contacted John to ask him that question. The bottom line? Taking Iran off-line would push prices to $130 or $140 per barrel. Here's John's complete response:
The market as it is currently configured, with strong demand growth (due to increased energy efficiencies, new sources of demand like China, and high US domestic growth) in combination with supply restrictions (aging of existing fields, nationalization pressures and inefficient management in Russia-Venezuela, and the long lead times necessary for new production) will conspire to produce a trading peak of up to $105 a barrel (an estimate from Arjun Murti from Goldman Sachs) without major supply disruption.
However, political risk is starting to have an impact. Iraq and Nigeria are already suffering declines in production. Since there isn't any spare capacity left, any further disruption in supply will spike prices beyond this level. If Iran is taken off-line, then prices will spike quickly. My estimate is that a major supply shortfall will push prices up to $130 to $140 range.
At that point, demand will fall off drastically as conservation and spending cut-backs kick in. Additionally, economies will begin to rapidly fall into recession which will reduce demand further. A year after the loss of Iranian oil, prices will likely drift below $100 a barrel again, but only due to the cumulative impact of negative global economic growth."
Does The Drez or another expert want to weigh in? Send us an e-mail.
More from Foreign Policy

Can Russia Get Used to Being China’s Little Brother?
The power dynamic between Beijing and Moscow has switched dramatically.

Xi and Putin Have the Most Consequential Undeclared Alliance in the World
It’s become more important than Washington’s official alliances today.

It’s a New Great Game. Again.
Across Central Asia, Russia’s brand is tainted by Ukraine, China’s got challenges, and Washington senses another opening.

Iraqi Kurdistan’s House of Cards Is Collapsing
The region once seemed a bright spot in the disorder unleashed by U.S. regime change. Today, things look bleak.