Sufficient oil in world to crimp Iranian supply FOR US
Global oil producers appear
to have enough spare capacity to make up for Iranian exports curtailed by tough
new sanctions, according to US Energy Secretary Steven Chu.Chu said it was
important that sanctions be used to crimp Iranian oil sales to ensure Tehran
does not develop nuclear weapons, despite the release of an Energy Information
Administration report this week that showed supplies are tight.” There is spare
capacity and we believe - we'll see - but I think there is sufficient spare
capacity," Chu told reporters on Capitol Hill, noting that the
administration will do whatever it can to help stabilise oil prices, including
looking at tapping strategic reserves.” It would be very destabilising; I think
everybody would agree, if Iran developed nuclear weapons. We're
trying to convince Iran in its best interests not to go in that
direction," he said.The final determination on whether there is enough
spare capacity is up to President Barack Obama, who will announce it to
Congress by the end of the month.Chu's confidence in supplies speaks to the
"tough balancing act" faced by the Obama administration as it
implements the sanctions, said Suzanne Maloney, a former
State Department adviser and now a senior fellow at the Brookings Institution.
The administration must show it intends to crack down as a deterrent to
countries that buy Iranian oil and "unnerve Tehran's confidence in its ability to ride
out these pressures," Maloney said. Iran maintains its nuclear program is
for peaceful purposes and denies it is trying to build nuclear weapons.Obama
must also fend off any ideas in an election year that he is anything but tough
on Iran, said David Pumphrey, an analyst at the Center for Strategic and
International Studies.”‘ We think we are capable, in effect, of seeing this
through' - that's how I would read the messaging," said Pumphrey, a former
Energy Department official. In a report that is part of the new sanctions law,
the Energy Information Administration (EIA), an independent arm of the US
Energy Department, found that Saudi Arabia has been pumping more oil.Saudi
Arabia, which has the world's biggest spare oil capacity, has produced an
average of 9.7 million barrels per day over the last two months, up 600,000 bpd
from the same period last year, the EIA said. But the EIA also said the cushion
provided by that spare capacity was modest by historical standards: 2.5 million
barrels per day, compared with an average of 3.7 million bpd a year ago. That
cushion is about equal to total shipments from Iran, the world's third-largest oil
exporter. Relying on the spare capacity "will require everything to work
almost flat out, and hoping that additional capacity can come online
smoothly," said Sarah Emerson at Energy Security Analysis Inc in Boston."I think we need to expect
some hiccups along the way.” US sanctions on foreign banks that handle Iranian
oil payments begin to take effect in June. But Obama, under a law he signed
late last year, can offer exemptions to countries that show they have
"significantly" cut their purchases from Iran."We still don't have a
definition of significant yet. It's a bit of 'the eye of the beholder,'"
Pumphrey said.There is strong political pressure from Congress to push ahead.
Senator Joe Lieberman, an independent, said the EIA report was a "green
light" to implement aggressively the energy sanctions.” With sufficient
spare capacity among global oil producers, there is no excuse for countries and
companies around the world not to curtail their purchases of Iranian crude, and
thus deny the Iranian regime the financial lifeblood it needs for its illicit
nuclear activities," Lieberman said in a statement.Obama faces mounting
political fire for high gasoline prices, which are due in part to tensions in
the Middle East.Chu told lawmakers at a hearing on Thursday that the
administration is doing what it can to ease the sting of high prices on
consumers and businesses. Some Democrats have urged the administration to
release oil from its Strategic Petroleum Reserves, but Chu declined to comment on how or
whether the new analysis from the EIA would affect that decision.” The
president will use whatever tools he has to do what we have to do. We have the
SPR option on the table," Chu told reporters. US House of Representatives
Speaker John Boehner said Obama does not seem to support a release as a way to
curb rising gasoline prices. Republican Senator Lisa Murkowski said the
reserves, stored in huge salt caverns, should be saved for real supply emergencies
rather than to try to ease prices.” I understand that tightness in world oil
markets and the pressing need for sanctions on Iran leave you in a difficult
position," said Murkowski, the top Republican on the Senate Energy
Committee.” It is critical that we fully enforce our sanctions regime and
preserve our strategic stockpiles until we really need them," she wrote to
Obama.
