The Thread Needler

How President Obama’s Iran Policies Are Raising the Price of Gas

President Obama has decreed that the Iranian government will not be allowed to build a nuclear weapon.

To discourage the Iranian regime from doing so, the Obama administration has put in place sanctions designed to prevent Iran from selling oil. These restrictions keep oil off the market, raising the price of gas at the pump.

In addition, the Obama administration has threatened to launch a war against Iran if it continues to develop a nuclear weapon. The possibility of an imminent, destabilizing war in the Middle East, which would reduce the available supply of oil, is doubtlessly contributing to high prices at the pump.

President Obama could easily reduce the price of gas. He needs only abandon bellicose talk of war, and instead pledge to pursue a strategy of containment against Iran.

Juan Cole:

Frum then went on to say that there were two ways Obama could affect the price of petroleum. He could release some American reserves of petroleum, and he could offer more clarity on his Iran policy.

And this is where Frum went off the rails. Obama cannot reduce the price of petroleum simply by being clearer on his Iran policy. In fact, it is the clarity of that policy that is contributing to high prices. A more vague and ambiguous policy is what might calm the markets.

Obama’s Iran policy is to visit crippling sanctions on Iran and to attempt to impose a financial embargo on the sale of Iranian petroleum. If you are an oil futures trader and you hear that, you might well conclude that Obama is trying to take Iranian petroleum off the market. You would be right. Guess what: less supply, assuming constant or increasing demand, equals higher prices. So you’d build that into the futures bids. And that would cause gasoline prices to rise or stay high.

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