Iran Hostage Tensions Drive Up Cost of Oil

The recent standoff between Britain and Iran over the fate of 15 captured marines has increased tensions, and with them, the price of oil.

On the London ICE Futures Exchange, crude oil rose to a ridiculous $66.55 a barrel, up more than 50 cents. Tony Blair's recent condemnation of Iran has done nothing to help the tensions. On Friday, he threatened Iran with continued economic isolation if it did not release the prisoners. He added that no one was fooled by the TV broadcast of soldiers apologizing for entering Iranian waters, saying that tactics like that didn't work.

It appears that those tactics do work, though, as evidenced by the result of that move. The entire world is so dependant on cheap energy that the slightest fluctuations in the price of crude will have dramatic and unfortunate economic repercussions. Iran, in addition to producing 15% of the middle east's oil, controls the Strait of Hormuz, a tanker route through which 17 million barrels of oil, over 90% of the middle east's production, pass everyday. If Iran were to want to cause the West misery, it could do it quite easily, likely starting a war in the process.

Although one investor was quoted saying that war was not a danger just yet, the prospect is not far from anyone's mind. Oil is nothing short of the lifeblood of the advanced capitalist world, and even tiny fluctuations in its price can be catastrophic. The current 52 cent increase is a major development, and has a great many people on edge.

Clearly, if Iran were to go to far, and drive the price up too high, it would be suicide. It would be a major offense to the national interests of not just America and Britain, but indeed the whole of the civilized world. There would come a point when justice and proper conduct would simply cease to matter, and immediate military intervention would become necessary to secure America's national interests.

Obviously, a third middle eastern war would enter the realm of the ridiculous. Already the US military is absurdly overextended, with soldiers being called back for third, fourth, and fifth tours of duty oversees. The war in Iraq alone has cost the US government over $400 billion, a sum that, put to other purposes, would likely be sufficient to eradicate the AIDS virus. Several hundred thousand have died. If the US were to invade Iran, it would not have the shield of the War on Terror to hide behind, and it would be increasingly hard to hide the fact that it would be a war fought over oil.

This is certainly not to say that an Iranian war is imminent. It is, however, interesting and slightly frightening to watch tensions build as oil prices rise.

Sources

http://www.forbes.com/topstories/home/feeds/ap/2007/03/30/ap3567586.html

http://www.eia.doe.gov/emeu/cabs/pgulf.html

http://nationalpriorities.org