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Iran oil boycott menaces world economy

  |   Jan. 15, 2012 at 11:17 AM
WASHINGTON, Jan. 15 (UPI) -- Some financial analysts say the rising tensions over Iran's nuclear program could throw a wrench into the world economy.

Analysts told The Washington Post that sanctions on Iranian oil could force already buoyant world crude prices even higher than they were in 2011, when the average price per barrel surged 14 percent over the record price set in 2008.

Major industrial nations boycotting Iranian crude would be forced to look elsewhere to cover their oil requirements, which would push the price of non-Iranian crude higher. Analysts say there are some doubts in the market the oil giant Saudi Arabia could make up for the lost Iranian supplies.

With futures prices settling in above $100 per barrel, worrisome forecasts warn that the global economic recover could stall. "At current prices, the world economy is going to grow at 3 percent to 3.5 percent this year," Adam Sieminski, chief energy economist at Deutsche Bank, told the Post. "That's not great, but it's OK. At $125 a barrel, it is only going to grow 2.5 percent, and that's not very good. At $150, we might only grow 1 percent, and that's a disaster."

The potential crude crisis could in particular add fuel to the European debt crisis, which also has U.S. economists and business leaders on edge. The United States has a longstanding boycott of Iranian crude in place; however Greece, Spain and Italy are major importers and could find themselves bearing the brunt of a boycott by the European Union.

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