Tuesday, June 16, 2009

Iran's Oil Disruption Cause For US Concern

Mahmoud AhmadinejadThe violently contested presidential election in Iran between Iranian President Mahmoud Ahmadinejad and reformist Mir Hossein Mousavi could cause major disruptions in world oil supplies and prices.

And that means bad news for US consumers.

Even though US companies are prohibited from buying Iran's oil, buyers of Iran's oil would be forced to buy from other suppliers. This would rasie prices for all buyers, including for US oil companies.

This has all happened before. Reuters reports today that Iran's oil shortfalls after the Islamic Revolution in 1978 contributed to the US recession in 1980 and 1981:
The disruption was keenly felt by top oil consumer the United States, which had to ration fuel. The shortfall ruptured global supply lines, sparked panic-buying and saw a sharp rise in oil prices that contributed to the U.S. recessions of 1980 and 1981.
us gasoline prices June 2009 department of energy
This is all potential bad news as oil prices and higher gasoline prices for US consumers continue to climb to new highs for the year.

Just this past week, according to the US Department of Energy, the average price of gasoline rose 5 cents per gallon topping to $2.67. This is up nearly $1.00 from the beginning of the year.

Americans should not be held hostage again to Iranian politics.

One of the best reasons for building and maintaining a domestic renewable biofuels industry, including ethanol, remains breaking free from the shackles of foreign oil.

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