US says world could handle loss of Iran oil
If Iran cuts off its oil exports due to the dispute over its N-program, the world could handle the lost supply, US said.india Updated: May 24, 2006 10:54 IST
Iran's dispute with the West over its nuclear program will probably not lead Tehran to cut off its oil exports, but if it did, the world could handle the lost supply, US Energy Secretary Sam Bodman said on Tuesday.
The United States and other western countries are worried that Iran is trying to build an atomic bomb, even though Tehran insists its seeking nuclear power only to boost electricity supplies.
"I don't lose sleep over their (Iran's) withholding oil from the marketplace because they are so dependent on oil export revenues," Bodman said at the Reuters Global Energy Summit in New York.
The Energy Department told Congress last week that the 26 countries that belong to the International Energy Agency have enough government-controlled and private commercial oil stocks to cover a disruption in Iran's crude oil exports for more than four years.
Energy traders are concerned that if the United Nations punished Iran with sanctions, Tehran could try to hurt the Western economies by stopping some or all of its oil exports -- as Iraq used to do before the US invasion in 2003.
"The big one everyone is worried about is some kind of showdown with Iran over the nuclear uranium reprocessing issue. The potential for that not only involves Iranian exports, but possibly spill over into other countries in the Middle East," said Adam Sieminski, chief energy economist for Deutsche Bank, who also spoke at the Reuters Energy Summit.
Worries over Iran helped crude prices hit a record over $75 a barrel last month.
Members of the United Nations Security Council were scheduled to meet on Wednesday to work out a joint plan to stop Iran from enriching uranium and to consider incentives proposed by European countries to convince Tehran to give up its nuclear program.
"We think we're at the early stages of diplomatic activity and we're hopeful that we will be successful," Bodman said.
However, if Iran decided to retaliate by cutting off its oil exports, the United States and other oil-consuming nations could handle the supply disruption, he said.
Iran is the world's fourth biggest oil exporter and holds 10 per cent of proven global oil reserves.
US sanctions against Iran prohibit direct US imports of Iranian oil. However, if some or all Iranian oil was taken off the market, other countries that buy Iran's crude would look for new supplies, competing with the United States, which imports 60 per cent of its petroleum.
Iran exports about 2.7 million barrels of oil a day, with most of that crude going to Japan, China, South Korea, Taiwan and Europe.
Energy experts say a shut-off of Iran's oil exports would send crude prices soaring, possibly up to $100 a barrel, because there is not enough global spare oil production capacity to offset Iran's lost supplies.
That is a risk worth taking if that was the result of preventing Iran from getting nuclear weapons, Bodman suggested.
"We believe that this country is intent on building a nuclear weapon. We don't need a nuclear weapon in Iran and we are taking every step we know how to to prevent that," Bodman said.
When asked whether the world should be prepared to lose Iran's oil and pay more for crude, Bodman responded: "I don't think it's in their interest to withhold oil."
Indeed, Iran's economy relies heavily on oil exports, which account for 80 to 90 per cent of its total export earnings and 40 to 50 per cent of the government budget, according to the US Energy Information Administration.
"Strong oil prices the past few years have boosted Iran's oil export revenues and helped Iran's economic situation," the EIA said. Iran's economy grew 5.6 per cent last year and is forecast to grow 4.8 per cent this year, the agency said.