March 24, 2012
A leading US-based energy consulting firm says oil price may hit $240 a barrel and economic growth may fall by over 25 percent if Iran closes the Strait of Hormuz in reaction to the Western sanctions.
Analysts at IHS Global Insight also told reporters that Iran can easily close the strategic strait and disrupt global oil supplies for up to three months by laying mines that the US and its allies would have to find and remove, USA Today reported.
“If Iran actually moves to close the Strait of Hormuz, crude oil prices may soar to $240 a barrel for some time,” said Sara Johnson, senior research director for Global Economics at IHS.
She added that oil prices may stay as high as $160 in the second quarter of the year before reverting to somewhere around $120.
Such an oil shock, Johnson stated, can bring back gas lines in much of the world, and shave next year’s global economic growth to 2.6 percent from a current forecast of 3.6 percent.
“If it [oil price] did hit $240 [a barrel], you’re looking at about a doubling of where gas prices are now; and the US [gas price] is at $4 [a gallon],” said Jim Burkhard, managing director of the global oil group at IHS CERA, the firm’s energy-research arm.
The expert stated that the impact would be so large as the global oil supplies are so tight.
“The world has only between 1.8 million and 2.5 million barrels per day of unused production capacity, down from 6.2 million in 2009. Tight inventories magnify the impact of any interruption in crude from nations around the Strait [of Hormuz],” Burkhard added.
The US and the European Union (EU) have imposed tough sanctions against Iran, since the beginning of 2012, to block the country’s oil exports and penalize other states for importing the Iranian crude.
They claim that Iran’s nuclear energy program includes a military component, ignoring the fact that International Atomic Energy Agency has never been able to prove a military diversion in Iran’s nuclear energy program despite meticulous inspections.
Tehran has threatened that if Iran’s oil exports are cut, the country may take retaliatory steps, including the closure the strategic Strait of Hormuz through which a daily total of 15-17 million barrels of oil pass.