World can't afford to lose Iran's oil-US EIA

Tom Doggett, Reuters:

A disruption in Iran's crude oil exports because of a dispute over that country's nuclear program would further crimp the already tight global oil market and lead to higher petroleum prices, the head of the U.S. Energy Information Administration warned on Tuesday.

"The market is so tightly balanced, clearly, we can't afford to lose a large supply of crude to the market," EIA chief Guy Caruso told Reuters in an interview. READ MORE

Though the United States does not directly import Iranian crude, Caruso said a cutoff of Iran's oil would affect the U.S. market because other countries that buy Iranian crude would compete with America to find new supplies.

"It's a fungible world oil market, and any disruption in supply affects everyone, because the price would go up for everyone," he said.

U.S. crude oil prices shot above $66 a barrel to a 3-1/2 month high on Tuesday, as the market fretted about the dispute with Iran and problems in Nigeria.

Caruso declined to say whether he believed a disruption of Iran's oil exports could send oil prices to $100 a barrel.

"I wouldn't want to speculate on that. Hopefully (the nuclear dispute) would be resolved without any disruption of supply," he said.

The United States and European Union want the United Nations Security Council to consider action against Iran to prevent, or punish, that country for moving forward with an uranium enrichment program that the West fears could lead the development of a nuclear bomb.

Iran says its uranium program is intended to create fuel to run nuclear power plants and boost electricity supplies.

Economic sanctions, which could affect Iran's oil exports, are possible but thought to be unlikely.

Iran, the world's fourth biggest oil exporter, has warned that global crude prices would go higher if the United Nations imposes sanctions.

Republican Sen. John McCain, a former U.S. presidential candidate, said Americans should be prepared to accept higher oil prices that may result from sanctions on Iran, if that is what it takes to stop Iran's nuclear program.

"These are a set of bad options, but if the price of oil has to go up, then that's a consequence we would have to suffer," McCain said.