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Iran: Trump’s Tweets Have Added $10 a Barrel to Cost of Oil

IFPRI -IMAGES / CC BY-NC-ND 2.0

Iran’s official for the Organization of Petroleum Countries, Governor Hossein Kazempour Ardebili, was quoted by the Iranian Press last week as directly taking aim at President Trump for roiling the oil markets with his Twitter activity: “Your tweets have increased the prices by at least $10. Please stop this method.”

Investors and buyers are jittery, worried about what prices per barrel will be like six months out. Lots of imponderables go into the price. The world produces about 99 million barrels a day. If even a million barrels a day goes off the market because of political turmoil (like in Libya and Venezuela), it has a disproportionate impact on prices. This year, world demand is likely to be up by over a million barrels a day. And, political turmoil and other factors could reduce supply.

Iran exports about 2.5 million barrels a day. Take that off the market, or any substantial part of it, and demand is higher than supply, equaling rising prices.

Hence Trump’s tweets can put up the price up.

Moreover, Trump’s brinkmanship with Iran has led the hardliners in Iran to threaten to close the Straits of Hormuz to shipping if Iran is crushed. They can’t actually do this, I have been assured by U.S. Navy officers, but as I said, oil markets are jittery and often put up prices for reasons that seem to me silly.

The episode is full of ironies. Trump has a thing about gasoline prices, probably remembering how everyone hated Jimmy Carter in the late 1970s during the oil price spike. But he can’t help wanting to strong-arm Iran and undo the 2015 nuclear deal, just because it was a signature achievement of Barack Obama. If Obama had jumped in a river to save children from drowning, Trump would hire hit men to track them down and shoot them now.

So he is, as usual, his own worst enemy, producing the opposite of what he is aiming for.

In fact, Trump is a one-man inflation-machine. The trade wars he is picking will cause consumers to have to pay more for automobiles and lots of other commodities. His own voting base will suffer most because they probably shop in Walmart, the chief marketing agent in the U.S. for the goods produced by the Chinese Communist Party.

 

Juan Cole / Informed Comment
Juan Cole
Contributor
Juan Cole is the Richard P. Mitchell Collegiate Professor of History at the University of Michigan and the proprietor of the Informed Comment e-zine. He has written extensively on modern Islamic movements in…
Juan Cole

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