President Bush's tough talk with Iran, like his rhetoric prior to invading Iraq, is racheting up oil prices around the world and picking the pockets of American motorists.
"Whenever the U.S. says things that make a military conflict with Iran seem more likely, the price of oil rises, strengthening Iran's regime rather than weakening it," writes James Surowiecki in the February 19-26 issue of The New Yorker magazine.
For example, during the second half of last year, the price of oil plunged nearly 30 per cent, "a disaster for an economy as dependent on oil revenue as Iran's," Surowiecki observed, noting Iran pumps almost 4-billion barrels daily and sells half of it abroad.
But when Bush dispatched a second aircraft-carrier group to the Persian Gulf and declared U.S. troops will detain or kill any Iranians found helping Iraq's insurgents, "oil prices started to rise, jumping 20 percent in just two weeks," Surowiecki said, putting an extra $20-million a day in Iranian President Mahmoud Ahmadinejad's pocket.
The recent oil price surge is driven by a jump in what oil traders call the "risk premium," a costly add-on buyers are willing to pay if they think oil fields might be shut down in the future, say, owing to conflict. They're willing to pay more for oil now to guarantee they'll have oil when they need it. "That's why, in the run-up to the Iraq war, oil prices jumped more than 50 per cent," Surowiecki recalled.
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