As the Ivy Leaguers are celebrating a major ‘breakthrough’ in the diplomatic stalemate with Iran, it’s incredible how many Americans are in the dark about what is actually behind all of this sudden media fanfare.
Let’s give credit where credit’s due — but not to these two swarmy used car salesmen. Just like every office manager in history, politicians will always seize on any possible opportunity to look like they’ve actually accomplished something.
While Barack Obama, after turning in no work for 6 years, is now busy staying after class trying to pass with a C- on his Nobel Peace Prize exam, and while John Kerry is trying shake his ‘Mr Excitement’ image just in time for a Presidential run in 2016, the real deals are being cut and dried behind the scenes between oilmen, middlemen, mullahs — and Goldman Sachs.
“Look busy, people are watching”: Barack and John rebuilding their image after Syria failure.
No, it’s not about heavy water reactors, or even the threat of the ‘Islamic bomb” — it never was.
If you want to know what’s it’s really all about, sit down and get out your solar-powered calculator. It’s all about petrodollars.
MODERATION AND EXCESS
In the immediate wake of the Iran sanctions-unwinding agreement thrown together with many unanswered question in Geneva, Sunday night, Brent crude fell $2.29 or about 2.7% to settle at $108.76 a barrel, while US-traded West Texas Intermediate was down $1.44 to $93.40, in response to the agreement. Analysts were however quick to warn that Iranian exports are unlikely to jump in the short term because key limitations on sales — including a ban on crude oil but not finished product exports to the EU — will remain in place until a comprehensive deal is reached, starting six months from now.
US and EU sanctions have had a claimed impact of reducing Iranian exports from almost 2.5 million barrels a day (Mbd) or their equivalent in refined products, to a little over 1 Mbd since early 2012. The apparent squeeze on global supplies that resulted has allowed overpriced oil to be ‘normal’. This is despite a global traded energy context, outside oil, where prices are falling, often far and fast.
Apart from the Syrian civil war crisis, Egypt’s unresolved civil strife, and Libya’s anarchy, Iran sanctions provided a clear storyline for the oil bulls, enabling them to overprice oil in day trading. The prospects of an Israeli, US or even Saudi military strike on Iran’s nuclear facilities, which are widespread across its territory, enabled the so-called geopolitical risk premium on oil, especially Brent grade which benchmarks eastern hemisphere oil trade, to attain and sometimes hold about $10 — $15 on every barrel against US WTI.
Removing this premium will cut WTI grade oil prices to around $80 per barrel and Brent to around $95.