Cost of oil sanctions to world's consumersLegality of UN sanctions against North KoreaDo sanctions really serve their purpose?Why are economic sanctions allowed under WTO rules?What is the purpose of the North Korea sanctions?Do sanctions have any expiry dates?Can the EU maintain financial channels and Oil trade with Iran like they claim in their statement on reimposition of US sanctions on the country?Russian sanctions under TrumpHow can Germany increase investments in Russia while EU economic sanctions against Russia are still in place?How do US sanctions work?
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Cost of oil sanctions to world's consumers
Legality of UN sanctions against North KoreaDo sanctions really serve their purpose?Why are economic sanctions allowed under WTO rules?What is the purpose of the North Korea sanctions?Do sanctions have any expiry dates?Can the EU maintain financial channels and Oil trade with Iran like they claim in their statement on reimposition of US sanctions on the country?Russian sanctions under TrumpHow can Germany increase investments in Russia while EU economic sanctions against Russia are still in place?How do US sanctions work?
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Crude oil prices could sink by as much as $30 a barrel if China decides to buy Iranian crude oil in retaliation to the latest U.S. tariff measures, according to Bank of America Merrill Lynch.
CNBC Aug 5 2019
If true, this seems to imply that the US sanctions are costing consumers an extra $30 per barrel (since removing the sanctions would have the same effect on prices). This adds up to about $1Trillion per year globally. Of course, this is good for producers.
High oil prices are painful to some countries, and higher prices slow economic growth.
Yet, there does not seem to be much concern about the price issue. Why is this? Sometimes people get very upset over smaller price changes.
economy sanctions
edited Aug 26 at 16:08
Machavity
21.3k7 gold badges65 silver badges100 bronze badges
asked Aug 26 at 2:56
Keith McClaryKeith McClary
7683 silver badges12 bronze badges
add a comment
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Crude oil prices could sink by as much as $30 a barrel if China decides to buy Iranian crude oil in retaliation to the latest U.S. tariff measures, according to Bank of America Merrill Lynch.
CNBC Aug 5 2019
If true, this seems to imply that the US sanctions are costing consumers an extra $30 per barrel (since removing the sanctions would have the same effect on prices). This adds up to about $1Trillion per year globally. Of course, this is good for producers.
High oil prices are painful to some countries, and higher prices slow economic growth.
Yet, there does not seem to be much concern about the price issue. Why is this? Sometimes people get very upset over smaller price changes.
economy sanctions
edited Aug 26 at 16:08
Machavity
21.3k7 gold badges65 silver badges100 bronze badges
asked Aug 26 at 2:56
Keith McClaryKeith McClary
7683 silver badges12 bronze badges
1
You can't really answer this sort of question simply, or in isolation. For instance, you'd have to ask about the long-term costs of not having sanctions, or of having temporarily cheaper oil - which encourages over-consumption, consequent air pollution, global warming, &c. (WRT the US in particular, higher oil prices don't seem to have particularly discouraged the purchase of gas-guzzling SUVs & pickups, RVs, ORVs, &c.)
– jamesqf
Aug 26 at 17:25
add a comment
|
Crude oil prices could sink by as much as $30 a barrel if China decides to buy Iranian crude oil in retaliation to the latest U.S. tariff measures, according to Bank of America Merrill Lynch.
CNBC Aug 5 2019
If true, this seems to imply that the US sanctions are costing consumers an extra $30 per barrel (since removing the sanctions would have the same effect on prices). This adds up to about $1Trillion per year globally. Of course, this is good for producers.
High oil prices are painful to some countries, and higher prices slow economic growth.
Yet, there does not seem to be much concern about the price issue. Why is this? Sometimes people get very upset over smaller price changes.
economy sanctions
edited Aug 26 at 16:08
Machavity
21.3k7 gold badges65 silver badges100 bronze badges
asked Aug 26 at 2:56
Keith McClaryKeith McClary
7683 silver badges12 bronze badges
Crude oil prices could sink by as much as $30 a barrel if China decides to buy Iranian crude oil in retaliation to the latest U.S. tariff measures, according to Bank of America Merrill Lynch.
CNBC Aug 5 2019
If true, this seems to imply that the US sanctions are costing consumers an extra $30 per barrel (since removing the sanctions would have the same effect on prices). This adds up to about $1Trillion per year globally. Of course, this is good for producers.
High oil prices are painful to some countries, and higher prices slow economic growth.
Yet, there does not seem to be much concern about the price issue. Why is this? Sometimes people get very upset over smaller price changes.
economy sanctions
economy sanctions
edited Aug 26 at 16:08
Machavity
21.3k7 gold badges65 silver badges100 bronze badges
asked Aug 26 at 2:56
Keith McClaryKeith McClary
7683 silver badges12 bronze badges
edited Aug 26 at 16:08
Machavity
21.3k7 gold badges65 silver badges100 bronze badges
asked Aug 26 at 2:56
Keith McClaryKeith McClary
7683 silver badges12 bronze badges
edited Aug 26 at 16:08
Machavity
21.3k7 gold badges65 silver badges100 bronze badges
edited Aug 26 at 16:08
Machavity
21.3k7 gold badges65 silver badges100 bronze badges
edited Aug 26 at 16:08
Machavity
21.3k7 gold badges65 silver badges100 bronze badges
21.3k7 gold badges65 silver badges100 bronze badges
asked Aug 26 at 2:56
Keith McClaryKeith McClary
7683 silver badges12 bronze badges
asked Aug 26 at 2:56
Keith McClaryKeith McClary
7683 silver badges12 bronze badges
asked Aug 26 at 2:56
Keith McClaryKeith McClary
7683 silver badges12 bronze badges
7683 silver badges12 bronze badges
1
You can't really answer this sort of question simply, or in isolation. For instance, you'd have to ask about the long-term costs of not having sanctions, or of having temporarily cheaper oil - which encourages over-consumption, consequent air pollution, global warming, &c. (WRT the US in particular, higher oil prices don't seem to have particularly discouraged the purchase of gas-guzzling SUVs & pickups, RVs, ORVs, &c.)
– jamesqf
Aug 26 at 17:25
add a comment
|
1
You can't really answer this sort of question simply, or in isolation. For instance, you'd have to ask about the long-term costs of not having sanctions, or of having temporarily cheaper oil - which encourages over-consumption, consequent air pollution, global warming, &c. (WRT the US in particular, higher oil prices don't seem to have particularly discouraged the purchase of gas-guzzling SUVs & pickups, RVs, ORVs, &c.)
– jamesqf
Aug 26 at 17:25
1
1
You can't really answer this sort of question simply, or in isolation. For instance, you'd have to ask about the long-term costs of not having sanctions, or of having temporarily cheaper oil - which encourages over-consumption, consequent air pollution, global warming, &c. (WRT the US in particular, higher oil prices don't seem to have particularly discouraged the purchase of gas-guzzling SUVs & pickups, RVs, ORVs, &c.)
– jamesqf
Aug 26 at 17:25
You can't really answer this sort of question simply, or in isolation. For instance, you'd have to ask about the long-term costs of not having sanctions, or of having temporarily cheaper oil - which encourages over-consumption, consequent air pollution, global warming, &c. (WRT the US in particular, higher oil prices don't seem to have particularly discouraged the purchase of gas-guzzling SUVs & pickups, RVs, ORVs, &c.)
– jamesqf
Aug 26 at 17:25
add a comment
|
2 Answers
2
active
oldest
votes
A rule of thumb from the 1980s: In the short term, a 1 percentage point shortfall in world oil supplies causes a 7 percentage point increase in oil prices. In economics jargon, the price elasticity of oil demand is 1/7.
During the summer of 2019, oil prices ranged between 50 and 60 dollars per barrel, which is between $ 1.20 and $ 1.45 per gallon of crude oil.
Iran is capable of producing 4.5 million barrels per day of oil. During the spring of 2019, the U.S. managed to reduce Iran's oil exports to less than half a million barrels per day. Total world oil production is about 83 million barrels per day.
Thus, the short-term worst case change in oil prices caused by preventing Iran from exporting oil is (4 million barrels per day) / (80 million barrels per day) * 7 * $ 55 / barrel = (5 %) * 7 * $ 55 / barrel = (35 %) * $ 55 / barrel = $ 20 per barrel.
But it has already been five months since the U.S. managed to prevent Iran from selling most of its oil, and the price of oil is now in the 50 - 60 $/barrel range. Over the 12 months from September 2018 through August 2019, the price has ranged from 45 - 75 $/barrel. The peak was in October 2018; the low was in January 2019. Interestingly, the price rose from 45 $/barrel to 65 $/barrel during January - May 2019, which is consistent with my 20 $/barrel estimate of the worst-case effect of cutting off Iranian oil exports.
This is because the North American oil industry (frackers and tar-sand melters) can profitably produce oil in the 40 - 60 $/barrel range. With a lag of a few months to a couple years, North American oil production tends to adjust to keep prices in this range. If the prices are below this range, some frackers go broke, and stop producing; this has the longer lag. If prices are above this range, Albertans melt the tar sands faster.
So over the medium term (several months to a couple years), the market adjusts around an equilibrium price.
Peter Zeihan has given a series of speeches over the last decade about how improving fracking technology changes the strategic calculus of the international oil trade. This Youtube link goes to one of his 2018 presentations.
answered Aug 26 at 4:13
JasperJasper
6,10222 silver badges36 bronze badges
3
All interesting, but I don't think it quite answers the question as asked. My guess would be the answer is then "North American producers prefer these higher prices, and North American consumers aren't generally aware of this issue, or consider it a price worth paying to punish Iran, or think that it adds value to the domestic economy overall"
– llama
Aug 26 at 16:50
@llama -- Your comment should be an answer, especially if you can find evidence for it. Answers can be upvoted or downvoted.
– Jasper
Aug 26 at 16:53
@llama American consumers don't really care because it's still overall cheaper than from the days where the price started with a 3 or 4. Consumers only really react when the price jumps. People just get used to gradual increases.
– pboss3010
Aug 26 at 16:57
@llama Also, I was asking about importing countries (besides the US) that are hurting. Why aren't they complaining (particularly since the sanctions are extraterritorial application of US law)? I guess Jasper is implicitly suggesting that his analysis is also their thinking.
– Keith McClary
Aug 26 at 17:23
@KeithMcClary -- Your comment suggests that you really have several questions: How much do the Iran sanctions affect the world price of oil? Why aren't net oil importers complaining about higher oil prices? To what extent are third parties inconvenienced by not being able to import Iranian oil? To what extent are third parties complaining about extraterritorial application of U.S. law to force them to not import Iranian oil, and why are they (not) complaining loudly?
– Jasper
Aug 26 at 18:05
|
show 5 more comments
If China buys Iranian oil, they aren't buying from the general pool that all nations use... which Iran is largely excluded from today due to sanctions.
Therefore, there will be a drop in demand. Since China now consumes quite a bit of oil, and has few internal oil sources, that would represent a substantial drop in demand from the normal supplies.
Demand goes down, supply goes up, price goes down. As oil is auctioned off as futures contracts, fluctuations in supply and demand tend to affect the price fairly quickly.
As to how much a drop and for how long, that's open to debate. The article you link to doesn't detail how that figure was arrived at, just mentioning that oil 'could' sink as much as $30/barrel, not that it definitely will.
The oil producing nations can just curtail their output to prop up prices, as they have done in the past.
However, if the price rises too high, then the shale/sand/fracking operations in the US and Canada become profitable, and supply goes back up. Since the oil producing nations depend on that oil revenue to contribute to their national economy, a major reduction in income can have very negative impacts on their economy.
The oil producing nations walk a very thin line these days. Not as simple as turning on the taps and raking in the cash.
answered Aug 29 at 17:39
tj1000tj1000
8,2857 silver badges29 bronze badges
add a comment
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2 Answers
2
active
oldest
votes
2 Answers
2
active
oldest
votes
active
oldest
votes
active
oldest
votes
A rule of thumb from the 1980s: In the short term, a 1 percentage point shortfall in world oil supplies causes a 7 percentage point increase in oil prices. In economics jargon, the price elasticity of oil demand is 1/7.
During the summer of 2019, oil prices ranged between 50 and 60 dollars per barrel, which is between $ 1.20 and $ 1.45 per gallon of crude oil.
Iran is capable of producing 4.5 million barrels per day of oil. During the spring of 2019, the U.S. managed to reduce Iran's oil exports to less than half a million barrels per day. Total world oil production is about 83 million barrels per day.
Thus, the short-term worst case change in oil prices caused by preventing Iran from exporting oil is (4 million barrels per day) / (80 million barrels per day) * 7 * $ 55 / barrel = (5 %) * 7 * $ 55 / barrel = (35 %) * $ 55 / barrel = $ 20 per barrel.
But it has already been five months since the U.S. managed to prevent Iran from selling most of its oil, and the price of oil is now in the 50 - 60 $/barrel range. Over the 12 months from September 2018 through August 2019, the price has ranged from 45 - 75 $/barrel. The peak was in October 2018; the low was in January 2019. Interestingly, the price rose from 45 $/barrel to 65 $/barrel during January - May 2019, which is consistent with my 20 $/barrel estimate of the worst-case effect of cutting off Iranian oil exports.
This is because the North American oil industry (frackers and tar-sand melters) can profitably produce oil in the 40 - 60 $/barrel range. With a lag of a few months to a couple years, North American oil production tends to adjust to keep prices in this range. If the prices are below this range, some frackers go broke, and stop producing; this has the longer lag. If prices are above this range, Albertans melt the tar sands faster.
So over the medium term (several months to a couple years), the market adjusts around an equilibrium price.
Peter Zeihan has given a series of speeches over the last decade about how improving fracking technology changes the strategic calculus of the international oil trade. This Youtube link goes to one of his 2018 presentations.
answered Aug 26 at 4:13
JasperJasper
6,10222 silver badges36 bronze badges
3
All interesting, but I don't think it quite answers the question as asked. My guess would be the answer is then "North American producers prefer these higher prices, and North American consumers aren't generally aware of this issue, or consider it a price worth paying to punish Iran, or think that it adds value to the domestic economy overall"
– llama
Aug 26 at 16:50
@llama -- Your comment should be an answer, especially if you can find evidence for it. Answers can be upvoted or downvoted.
– Jasper
Aug 26 at 16:53
@llama American consumers don't really care because it's still overall cheaper than from the days where the price started with a 3 or 4. Consumers only really react when the price jumps. People just get used to gradual increases.
– pboss3010
Aug 26 at 16:57
@llama Also, I was asking about importing countries (besides the US) that are hurting. Why aren't they complaining (particularly since the sanctions are extraterritorial application of US law)? I guess Jasper is implicitly suggesting that his analysis is also their thinking.
– Keith McClary
Aug 26 at 17:23
@KeithMcClary -- Your comment suggests that you really have several questions: How much do the Iran sanctions affect the world price of oil? Why aren't net oil importers complaining about higher oil prices? To what extent are third parties inconvenienced by not being able to import Iranian oil? To what extent are third parties complaining about extraterritorial application of U.S. law to force them to not import Iranian oil, and why are they (not) complaining loudly?
– Jasper
Aug 26 at 18:05
|
show 5 more comments
A rule of thumb from the 1980s: In the short term, a 1 percentage point shortfall in world oil supplies causes a 7 percentage point increase in oil prices. In economics jargon, the price elasticity of oil demand is 1/7.
During the summer of 2019, oil prices ranged between 50 and 60 dollars per barrel, which is between $ 1.20 and $ 1.45 per gallon of crude oil.
Iran is capable of producing 4.5 million barrels per day of oil. During the spring of 2019, the U.S. managed to reduce Iran's oil exports to less than half a million barrels per day. Total world oil production is about 83 million barrels per day.
Thus, the short-term worst case change in oil prices caused by preventing Iran from exporting oil is (4 million barrels per day) / (80 million barrels per day) * 7 * $ 55 / barrel = (5 %) * 7 * $ 55 / barrel = (35 %) * $ 55 / barrel = $ 20 per barrel.
But it has already been five months since the U.S. managed to prevent Iran from selling most of its oil, and the price of oil is now in the 50 - 60 $/barrel range. Over the 12 months from September 2018 through August 2019, the price has ranged from 45 - 75 $/barrel. The peak was in October 2018; the low was in January 2019. Interestingly, the price rose from 45 $/barrel to 65 $/barrel during January - May 2019, which is consistent with my 20 $/barrel estimate of the worst-case effect of cutting off Iranian oil exports.
This is because the North American oil industry (frackers and tar-sand melters) can profitably produce oil in the 40 - 60 $/barrel range. With a lag of a few months to a couple years, North American oil production tends to adjust to keep prices in this range. If the prices are below this range, some frackers go broke, and stop producing; this has the longer lag. If prices are above this range, Albertans melt the tar sands faster.
So over the medium term (several months to a couple years), the market adjusts around an equilibrium price.
Peter Zeihan has given a series of speeches over the last decade about how improving fracking technology changes the strategic calculus of the international oil trade. This Youtube link goes to one of his 2018 presentations.
answered Aug 26 at 4:13
JasperJasper
6,10222 silver badges36 bronze badges
3
All interesting, but I don't think it quite answers the question as asked. My guess would be the answer is then "North American producers prefer these higher prices, and North American consumers aren't generally aware of this issue, or consider it a price worth paying to punish Iran, or think that it adds value to the domestic economy overall"
– llama
Aug 26 at 16:50
@llama -- Your comment should be an answer, especially if you can find evidence for it. Answers can be upvoted or downvoted.
– Jasper
Aug 26 at 16:53
@llama American consumers don't really care because it's still overall cheaper than from the days where the price started with a 3 or 4. Consumers only really react when the price jumps. People just get used to gradual increases.
– pboss3010
Aug 26 at 16:57
@llama Also, I was asking about importing countries (besides the US) that are hurting. Why aren't they complaining (particularly since the sanctions are extraterritorial application of US law)? I guess Jasper is implicitly suggesting that his analysis is also their thinking.
– Keith McClary
Aug 26 at 17:23
@KeithMcClary -- Your comment suggests that you really have several questions: How much do the Iran sanctions affect the world price of oil? Why aren't net oil importers complaining about higher oil prices? To what extent are third parties inconvenienced by not being able to import Iranian oil? To what extent are third parties complaining about extraterritorial application of U.S. law to force them to not import Iranian oil, and why are they (not) complaining loudly?
– Jasper
Aug 26 at 18:05
|
show 5 more comments
A rule of thumb from the 1980s: In the short term, a 1 percentage point shortfall in world oil supplies causes a 7 percentage point increase in oil prices. In economics jargon, the price elasticity of oil demand is 1/7.
During the summer of 2019, oil prices ranged between 50 and 60 dollars per barrel, which is between $ 1.20 and $ 1.45 per gallon of crude oil.
Iran is capable of producing 4.5 million barrels per day of oil. During the spring of 2019, the U.S. managed to reduce Iran's oil exports to less than half a million barrels per day. Total world oil production is about 83 million barrels per day.
Thus, the short-term worst case change in oil prices caused by preventing Iran from exporting oil is (4 million barrels per day) / (80 million barrels per day) * 7 * $ 55 / barrel = (5 %) * 7 * $ 55 / barrel = (35 %) * $ 55 / barrel = $ 20 per barrel.
But it has already been five months since the U.S. managed to prevent Iran from selling most of its oil, and the price of oil is now in the 50 - 60 $/barrel range. Over the 12 months from September 2018 through August 2019, the price has ranged from 45 - 75 $/barrel. The peak was in October 2018; the low was in January 2019. Interestingly, the price rose from 45 $/barrel to 65 $/barrel during January - May 2019, which is consistent with my 20 $/barrel estimate of the worst-case effect of cutting off Iranian oil exports.
This is because the North American oil industry (frackers and tar-sand melters) can profitably produce oil in the 40 - 60 $/barrel range. With a lag of a few months to a couple years, North American oil production tends to adjust to keep prices in this range. If the prices are below this range, some frackers go broke, and stop producing; this has the longer lag. If prices are above this range, Albertans melt the tar sands faster.
So over the medium term (several months to a couple years), the market adjusts around an equilibrium price.
Peter Zeihan has given a series of speeches over the last decade about how improving fracking technology changes the strategic calculus of the international oil trade. This Youtube link goes to one of his 2018 presentations.
answered Aug 26 at 4:13
JasperJasper
6,10222 silver badges36 bronze badges
A rule of thumb from the 1980s: In the short term, a 1 percentage point shortfall in world oil supplies causes a 7 percentage point increase in oil prices. In economics jargon, the price elasticity of oil demand is 1/7.
During the summer of 2019, oil prices ranged between 50 and 60 dollars per barrel, which is between $ 1.20 and $ 1.45 per gallon of crude oil.
Iran is capable of producing 4.5 million barrels per day of oil. During the spring of 2019, the U.S. managed to reduce Iran's oil exports to less than half a million barrels per day. Total world oil production is about 83 million barrels per day.
Thus, the short-term worst case change in oil prices caused by preventing Iran from exporting oil is (4 million barrels per day) / (80 million barrels per day) * 7 * $ 55 / barrel = (5 %) * 7 * $ 55 / barrel = (35 %) * $ 55 / barrel = $ 20 per barrel.
But it has already been five months since the U.S. managed to prevent Iran from selling most of its oil, and the price of oil is now in the 50 - 60 $/barrel range. Over the 12 months from September 2018 through August 2019, the price has ranged from 45 - 75 $/barrel. The peak was in October 2018; the low was in January 2019. Interestingly, the price rose from 45 $/barrel to 65 $/barrel during January - May 2019, which is consistent with my 20 $/barrel estimate of the worst-case effect of cutting off Iranian oil exports.
This is because the North American oil industry (frackers and tar-sand melters) can profitably produce oil in the 40 - 60 $/barrel range. With a lag of a few months to a couple years, North American oil production tends to adjust to keep prices in this range. If the prices are below this range, some frackers go broke, and stop producing; this has the longer lag. If prices are above this range, Albertans melt the tar sands faster.
So over the medium term (several months to a couple years), the market adjusts around an equilibrium price.
Peter Zeihan has given a series of speeches over the last decade about how improving fracking technology changes the strategic calculus of the international oil trade. This Youtube link goes to one of his 2018 presentations.
answered Aug 26 at 4:13
JasperJasper
6,10222 silver badges36 bronze badges
edited Aug 26 at 4:42
answered Aug 26 at 4:13
JasperJasper
6,10222 silver badges36 bronze badges
answered Aug 26 at 4:13
JasperJasper
6,10222 silver badges36 bronze badges
answered Aug 26 at 4:13
JasperJasper
6,10222 silver badges36 bronze badges
6,10222 silver badges36 bronze badges
3
All interesting, but I don't think it quite answers the question as asked. My guess would be the answer is then "North American producers prefer these higher prices, and North American consumers aren't generally aware of this issue, or consider it a price worth paying to punish Iran, or think that it adds value to the domestic economy overall"
– llama
Aug 26 at 16:50
@llama -- Your comment should be an answer, especially if you can find evidence for it. Answers can be upvoted or downvoted.
– Jasper
Aug 26 at 16:53
@llama American consumers don't really care because it's still overall cheaper than from the days where the price started with a 3 or 4. Consumers only really react when the price jumps. People just get used to gradual increases.
– pboss3010
Aug 26 at 16:57
@llama Also, I was asking about importing countries (besides the US) that are hurting. Why aren't they complaining (particularly since the sanctions are extraterritorial application of US law)? I guess Jasper is implicitly suggesting that his analysis is also their thinking.
– Keith McClary
Aug 26 at 17:23
@KeithMcClary -- Your comment suggests that you really have several questions: How much do the Iran sanctions affect the world price of oil? Why aren't net oil importers complaining about higher oil prices? To what extent are third parties inconvenienced by not being able to import Iranian oil? To what extent are third parties complaining about extraterritorial application of U.S. law to force them to not import Iranian oil, and why are they (not) complaining loudly?
– Jasper
Aug 26 at 18:05
|
show 5 more comments
3
All interesting, but I don't think it quite answers the question as asked. My guess would be the answer is then "North American producers prefer these higher prices, and North American consumers aren't generally aware of this issue, or consider it a price worth paying to punish Iran, or think that it adds value to the domestic economy overall"
– llama
Aug 26 at 16:50
@llama -- Your comment should be an answer, especially if you can find evidence for it. Answers can be upvoted or downvoted.
– Jasper
Aug 26 at 16:53
@llama American consumers don't really care because it's still overall cheaper than from the days where the price started with a 3 or 4. Consumers only really react when the price jumps. People just get used to gradual increases.
– pboss3010
Aug 26 at 16:57
@llama Also, I was asking about importing countries (besides the US) that are hurting. Why aren't they complaining (particularly since the sanctions are extraterritorial application of US law)? I guess Jasper is implicitly suggesting that his analysis is also their thinking.
– Keith McClary
Aug 26 at 17:23
@KeithMcClary -- Your comment suggests that you really have several questions: How much do the Iran sanctions affect the world price of oil? Why aren't net oil importers complaining about higher oil prices? To what extent are third parties inconvenienced by not being able to import Iranian oil? To what extent are third parties complaining about extraterritorial application of U.S. law to force them to not import Iranian oil, and why are they (not) complaining loudly?
– Jasper
Aug 26 at 18:05
3
3
All interesting, but I don't think it quite answers the question as asked. My guess would be the answer is then "North American producers prefer these higher prices, and North American consumers aren't generally aware of this issue, or consider it a price worth paying to punish Iran, or think that it adds value to the domestic economy overall"
– llama
Aug 26 at 16:50
All interesting, but I don't think it quite answers the question as asked. My guess would be the answer is then "North American producers prefer these higher prices, and North American consumers aren't generally aware of this issue, or consider it a price worth paying to punish Iran, or think that it adds value to the domestic economy overall"
– llama
Aug 26 at 16:50
@llama -- Your comment should be an answer, especially if you can find evidence for it. Answers can be upvoted or downvoted.
– Jasper
Aug 26 at 16:53
@llama -- Your comment should be an answer, especially if you can find evidence for it. Answers can be upvoted or downvoted.
– Jasper
Aug 26 at 16:53
@llama American consumers don't really care because it's still overall cheaper than from the days where the price started with a 3 or 4. Consumers only really react when the price jumps. People just get used to gradual increases.
– pboss3010
Aug 26 at 16:57
@llama American consumers don't really care because it's still overall cheaper than from the days where the price started with a 3 or 4. Consumers only really react when the price jumps. People just get used to gradual increases.
– pboss3010
Aug 26 at 16:57
@llama Also, I was asking about importing countries (besides the US) that are hurting. Why aren't they complaining (particularly since the sanctions are extraterritorial application of US law)? I guess Jasper is implicitly suggesting that his analysis is also their thinking.
– Keith McClary
Aug 26 at 17:23
@llama Also, I was asking about importing countries (besides the US) that are hurting. Why aren't they complaining (particularly since the sanctions are extraterritorial application of US law)? I guess Jasper is implicitly suggesting that his analysis is also their thinking.
– Keith McClary
Aug 26 at 17:23
@KeithMcClary -- Your comment suggests that you really have several questions: How much do the Iran sanctions affect the world price of oil? Why aren't net oil importers complaining about higher oil prices? To what extent are third parties inconvenienced by not being able to import Iranian oil? To what extent are third parties complaining about extraterritorial application of U.S. law to force them to not import Iranian oil, and why are they (not) complaining loudly?
– Jasper
Aug 26 at 18:05
@KeithMcClary -- Your comment suggests that you really have several questions: How much do the Iran sanctions affect the world price of oil? Why aren't net oil importers complaining about higher oil prices? To what extent are third parties inconvenienced by not being able to import Iranian oil? To what extent are third parties complaining about extraterritorial application of U.S. law to force them to not import Iranian oil, and why are they (not) complaining loudly?
– Jasper
Aug 26 at 18:05
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If China buys Iranian oil, they aren't buying from the general pool that all nations use... which Iran is largely excluded from today due to sanctions.
Therefore, there will be a drop in demand. Since China now consumes quite a bit of oil, and has few internal oil sources, that would represent a substantial drop in demand from the normal supplies.
Demand goes down, supply goes up, price goes down. As oil is auctioned off as futures contracts, fluctuations in supply and demand tend to affect the price fairly quickly.
As to how much a drop and for how long, that's open to debate. The article you link to doesn't detail how that figure was arrived at, just mentioning that oil 'could' sink as much as $30/barrel, not that it definitely will.
The oil producing nations can just curtail their output to prop up prices, as they have done in the past.
However, if the price rises too high, then the shale/sand/fracking operations in the US and Canada become profitable, and supply goes back up. Since the oil producing nations depend on that oil revenue to contribute to their national economy, a major reduction in income can have very negative impacts on their economy.
The oil producing nations walk a very thin line these days. Not as simple as turning on the taps and raking in the cash.
answered Aug 29 at 17:39
tj1000tj1000
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If China buys Iranian oil, they aren't buying from the general pool that all nations use... which Iran is largely excluded from today due to sanctions.
Therefore, there will be a drop in demand. Since China now consumes quite a bit of oil, and has few internal oil sources, that would represent a substantial drop in demand from the normal supplies.
Demand goes down, supply goes up, price goes down. As oil is auctioned off as futures contracts, fluctuations in supply and demand tend to affect the price fairly quickly.
As to how much a drop and for how long, that's open to debate. The article you link to doesn't detail how that figure was arrived at, just mentioning that oil 'could' sink as much as $30/barrel, not that it definitely will.
The oil producing nations can just curtail their output to prop up prices, as they have done in the past.
However, if the price rises too high, then the shale/sand/fracking operations in the US and Canada become profitable, and supply goes back up. Since the oil producing nations depend on that oil revenue to contribute to their national economy, a major reduction in income can have very negative impacts on their economy.
The oil producing nations walk a very thin line these days. Not as simple as turning on the taps and raking in the cash.
answered Aug 29 at 17:39
tj1000tj1000
8,2857 silver badges29 bronze badges
add a comment
|
If China buys Iranian oil, they aren't buying from the general pool that all nations use... which Iran is largely excluded from today due to sanctions.
Therefore, there will be a drop in demand. Since China now consumes quite a bit of oil, and has few internal oil sources, that would represent a substantial drop in demand from the normal supplies.
Demand goes down, supply goes up, price goes down. As oil is auctioned off as futures contracts, fluctuations in supply and demand tend to affect the price fairly quickly.
As to how much a drop and for how long, that's open to debate. The article you link to doesn't detail how that figure was arrived at, just mentioning that oil 'could' sink as much as $30/barrel, not that it definitely will.
The oil producing nations can just curtail their output to prop up prices, as they have done in the past.
However, if the price rises too high, then the shale/sand/fracking operations in the US and Canada become profitable, and supply goes back up. Since the oil producing nations depend on that oil revenue to contribute to their national economy, a major reduction in income can have very negative impacts on their economy.
The oil producing nations walk a very thin line these days. Not as simple as turning on the taps and raking in the cash.
answered Aug 29 at 17:39
tj1000tj1000
8,2857 silver badges29 bronze badges
If China buys Iranian oil, they aren't buying from the general pool that all nations use... which Iran is largely excluded from today due to sanctions.
Therefore, there will be a drop in demand. Since China now consumes quite a bit of oil, and has few internal oil sources, that would represent a substantial drop in demand from the normal supplies.
Demand goes down, supply goes up, price goes down. As oil is auctioned off as futures contracts, fluctuations in supply and demand tend to affect the price fairly quickly.
As to how much a drop and for how long, that's open to debate. The article you link to doesn't detail how that figure was arrived at, just mentioning that oil 'could' sink as much as $30/barrel, not that it definitely will.
The oil producing nations can just curtail their output to prop up prices, as they have done in the past.
However, if the price rises too high, then the shale/sand/fracking operations in the US and Canada become profitable, and supply goes back up. Since the oil producing nations depend on that oil revenue to contribute to their national economy, a major reduction in income can have very negative impacts on their economy.
The oil producing nations walk a very thin line these days. Not as simple as turning on the taps and raking in the cash.
answered Aug 29 at 17:39
tj1000tj1000
8,2857 silver badges29 bronze badges
answered Aug 29 at 17:39
tj1000tj1000
8,2857 silver badges29 bronze badges
answered Aug 29 at 17:39
tj1000tj1000
8,2857 silver badges29 bronze badges
answered Aug 29 at 17:39
tj1000tj1000
8,2857 silver badges29 bronze badges
8,2857 silver badges29 bronze badges
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1
You can't really answer this sort of question simply, or in isolation. For instance, you'd have to ask about the long-term costs of not having sanctions, or of having temporarily cheaper oil - which encourages over-consumption, consequent air pollution, global warming, &c. (WRT the US in particular, higher oil prices don't seem to have particularly discouraged the purchase of gas-guzzling SUVs & pickups, RVs, ORVs, &c.)
– jamesqf
Aug 26 at 17:25