Business | Oil & Gas
Channel Sponsor
US ready to face full supply cut by Iran
US and world emergency crude reserves could replace a complete shut-off of Iranian oil exports for 18 months, avoiding an estimated $201 billion in damage to the American economy, the Government Accountability Office said on Tuesday.
- Reuters
- Published: 00:00 October 5, 2006
Washington: US and world emergency crude reserves could replace a complete shut-off of Iranian oil exports for 18 months, avoiding an estimated $201 billion in damage to the American economy, the Government Accountability Office said on Tuesday.
There has been concern among energy traders that tough action by the US and other western countries against Iran's nuclear programme could cause Tehran to retaliate by cutting off the country's oil exports. Such a disruption would remove close to 1.5 billion barrels of crude from the market over an 18-month period, according to the GAO, the investigative arm of the US Congress.
To avoid a huge price spike and ensure adequate supplies, the United States could coordinate with its fellow member countries in the International Energy Agency (IEA) to jointly release their emergency oil reserves to offset a disruption in Iranian crude shipments for 18 months, the GAO said.
Iran is the world's fourth-biggest oil exporter, selling about 2.7 million barrels per day.
US Secretary of State Condoleezza Rice, speaking in Saudi Arabia, said on Tuesday that the "only choice" for the international community is to impose sanctions on Iran if Tehran does not suspend uranium enrichment in the country's nuclear programme.
The United States does not directly import oil from Iran, but a shut-off of Iranian oil exports would force countries that do buy Iranian oil to compete with the United States for crude supplies from other producing nations.
"Removing this (Iranian) oil from the market would raise prices everywhere, thus impacting the US economy," the GAO said in its new report on how the US emergency oil stockpile should be operated.
"At their current capacities, the SPR (Strategic Petroleum Reserve) and international reserves can replace the oil lost ... doing so protects the economy from significant damage," the agency said.
The United States holds about 688 million barrels of oil in the SPR.
In addition, other IEA member countries have about 2.7 billion barrels of public and industry reserves, with about 700 million barrels under government control for emergency purposes.
The GAO said that using excess world oil production capacity, particularly in Saudi Arabia, along with industrial customers switching from oil to natural gas for fuel, would also be needed to help offset a disruption in Iranian oil exports.
Tough stance : ENI to take sanctions in account during stay
Italian energy company ENI will continue to operate in Iran but would take any UN sanctions into account, a spokeswoman yesterday quoted CEO Paolo Scaroni as saying.
"If there is a UN initiative (for sanctions), they will be taken into account, but our wish is to keep working in this country," Scaroni told parliament, according to the spokeswoman.
He pointed out that Iran has enormous energy reserves and ENI had been in the country since 1957.
Share this article
Popular in Business
-
Budget travel
Airlines in the region
Take a pictorial look at some of the budget airlines in GCC
Business Editor's choice
-
Media baron Murdoch cries foul
Murdoch's suggestion of content theft infuriates digital evangelists
-
Jobs vital to global recovery
Higher unemployment reduces purchasing power and revenues
-
Abulhoul Aviation to begin operations
New charter company will use Cessna 206 Station Air to transport tourists
