Wednesday, May 10, 2006

So....I'm a Geek

Apparently that's what my subscription to "Foreign Policy" says about me.

However, I want to point out something I found very telling and relevent vis-a-vis Iran. Especially in light of the billet-doux from Iranian President Mahmoud Ahmadinejad. You can read about The Letter over at Blackfive. But this article was more background on why Iran feels that way they do.

This is the part I found to be important.

"Why the hesitation to take stronger action? One reason is certainly that China and Russia have been reluctant partners in the business of pressuring Tehran. China expects to sign long-term agreements for Iranian oil worth an estimated $100 billion. Russia is building nuclear reactors in Iran for which it is receiving billions of dollars as well. But the West, including the United States, has an even stronger and more direct incentive to talk instead of act: Any misstep in the campaign to deter Iran from developing nuclear technology that might be used for an atomic bomb could lead to an explosion in the cost of oil.

The Iranians know that, of course, and as soon as President Mahmoud Ahmadinejad took office in August, the regime began performing as if a higher law—supply and demand—would protect it no matter how much it provoked the international community. As Iran’s delegate to the IAEA, Ali Asghar Soltanieh, said bluntly in March, Tehran estimates that “the United States has the power to cause harm and pain, but the United States is also susceptible to harm and pain. So if that is the path that the U.S. wishes to choose, let the ball roll.”
The basic arithmetic is simple. There is just barely enough oil in today’s market to meet the global demand for about 85 million barrels a day. With almost all oil producers pumping every drop they can get out of the ground or from under the sea, a margin of roughly 1.5 million barrels a day is left over. Iran exports about 2.7 million barrels a day. If an international embargo, a military attack, or a political decision in Tehran took that Iranian oil off the market, prices could well soar from the current price of around $60 a barrel to $90 a barrel or higher. Adjusted for inflation, that would equal or surpass the oil shocks of 1973 and 1979. Painful indeed."

The entire article is here.

If you have the time there is also a very interesting article on Petropolitics and of course this issue has the Failed States Index.


Sgt. B. said...

The simple solution is, of course, to allow drilling of the oil fields sitting right off of our own coasts. Environmentally responsible drilling.
Also, realize that there haven't been any new refineries built in the United States for the past thirty years, which means that the most "modern" refinery is simply a 30 year old refinery that has gone through a series of upgrades. Technology in the petrochemical industry has advanced by leaps and bounds, and the advantage of building a brand new refinery, with brand new technology cannot be discounted.
Also, the development of "bio-diesel" cannot be ignored. This fuel can be refined in your own basement, with no greater technology than an old hot water heater and used cooking grease. Considering that most of the heavy rigs really vital to our agricultural infrastructure relies on diesel, and not gasoline, it wouldn't be a bad move to push for the conversion to bio-diesel powerplants, as well as the establishment of small "mom and pop" refineries.
I'd even switch my old M-37 truck to a bio-diesel powerplant (and prolly figure out a way to refine my own fuel...

BostonMaggie said...

Those solutions are long term. The point of the article is that Iran is sitting in the catbird seat for the next three years.........and they know it.

jarhead john said...

Not a very comfy situation, no matter how you look at it.

MaryAnn said...

On the other hand, they may be underestimating our pain points.

Think $2.90 for Gasoline Is High? Try $5.17

"Adjusted for inflation, a gallon of gasoline would have cost about $1.76 per gallon in 1955, but that's not a complete analysis, Jerry Taylor, a senior fellow at the Cato Institute, argued.

Taylor said per capita household income increased at a much faster clip over the last five decades than the price of gasoline. As a result, using the inflation and income adjustments, the current average gallon of gas that costs the consumer $2.90 would have cost closer to $5.17 per gallon in 1955, Taylor said."

Now that my be neither here nor there, and perception is everything, but it's still an interesting perspective.

And I hear ya, Sgt B. - we didn't pay $7,200,000 to buy Alaska for nothing ;-)