OPINION:
Crude oil, the lifeblood of the global economy, is returning to its expensive past. While President Trump’s economic revival has put more money into the pockets of U.S. consumers, efforts to restrain the nuclear ambitions of Iran is pinching the supply of oil. Americans are likely to relive the pain of a decade past, but ending the Islamic regime’s menacing behavior will be worth the price.
Whispers of hundred-dollar a barrel oil are growing louder, with the domestic yardstick West Texas Intermediate surpassing $75 a barrel and international benchmark Brent crude breaking through a four-year high of $85. The slow and steady climb is showing up at the gasoline pump with the average price of unleaded regular nationwide reaching $2.90 a gallon — 6 cents higher than a month ago and 36 cents more than a year ago, according to the American Automobile Association. It’s still well below the astronomical $4.11 in July 2008, but current prices in some high-tax states are not far below that. Californians are already paying up to $3.77 a gallon.
Shock reverberated worldwide with the president’s decision in May to withdraw from the Iran nuclear deal orchestrated by Barack Obama. Declaring the Islamic republic a rogue regime, Mr. Trump presented signatory nations with the bitter choice: Do business with the United States or with Iran, but you can’t do business with both. It was just the sort of ultimatum that sends a globalist to his therapist. The president calls the pact “probably the worst deal ever.” That deal has sent billions in cash to Iran, which the mullahs used to pay for terrorism throughout the Middle East. The West learns again that purchasing peace, tempting as it may sometimes be, is always a fool’s errand.
Renewed economic sanctions have taken a toll on the Iranian economy, with the rial bouncing to between 135,000 and 190,000 to the dollar in recent days. It’s the approaching Nov. 4 deadline for oil-consuming nations to halt crude purchases that stands to deliver the hardest blow. Shipments from the state-run Iranian oil company have declined nearly 35 percent since June to about 1.5 million barrels a day, according to the financial news website Marketwatch. Even China, the energy-needy economic giant that had vowed to ignore the U.S.-led sanctions campaign, is beginning to reduce its purchases of Iranian crude.
Saudi Arabia has promised to open its mighty oil spigot to offset the loss of more than a million barrels a day. If sufficient oil isn’t available, market stability will fade like a mirage in the Arabian Desert. The new trade deal Mr. Trump just negotiated with Canada and Mexico could spur new economic growth that, ironically, would tighten oil markets further. “We are moving into a world where you have lower inventories, lower spare capacity and less protection for buyers,” JTD Energy Services strategist John Driscoll tells CNBC News. “So $100 a barrel has become more likely.”
The House of Saud has bought into the Trump Middle East strategy by containing its archenemy, Iran. The kingdom’s 2017 purchase of $110 billion worth of tanks, combat ships, missile defense systems and cybersecurity technology provides an effective counterbalance to Iranian mischief in the region. Nevertheless, Mr. Trump shouldn’t hesitate to remind the Saudis of their obligation to neutralize the mullahs’ leverage on the global petroleum market.
The Islamic republic in Tehran is even now strengthening a concerted terror campaign to frighten energy-dependent nations into ignoring the U.S.-led sanctions. Iran has ordered naval exercises meant to demonstrate a capability to halt shipping traffic through the Strait of Hormuz, a narrow channel through which 35 percent of the world’s seaborne oil moves. Firing ballistic missiles into war-torn Syria is meant to expose the vulnerability of U.S. forces in the region.
It doesn’t take a declaration of war to spook oil markets, and Tehran’s saber-rattling is contributing to the rise of uncomfortably high prices of oil. That means U.S. consumers will likely pay more for the fuel that keeps the economy humming owing to Mr. Trump’s tough stance against the Iran nuclear deal.
The Iranian Revolution is in its 40th year, and Americans have paid dearly in lives and treasure for the mullahs’ terror and turmoil. So have other nations of the global community, including Great Britain, France and Germany. They’re anguishing over lost trade with the Islamic republic. He who cherishes peace should be willing to pay more to force Iran to hammer its nuclear swords into plowshares.
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