Jerusalem, Jan. 26 – The new EU oil sanctions on Iran will hit the Islamic Republic hard, but will not have a long term affect on oil prices and supply to the West, a former energy consultant to the World Bank said.
The sanctions, approved earlier this week, will be a $20 billion dollar blow to the Iranian economy, which is highly reliant on oil export income. “It is going to affect the Iranian economy drastically,” said Dr. Amit Mor, an Israeli energy expert specializing in national energy planning.
If Iran unilaterally cut supplies it could spike oil prices to $150 a barrel, but Mor said several scenarios show this would only affect supply for a few months. “Very quickly Saudi Arabia and others would compensate production, and the USA, Europe, Japan and others can also pull some oil from their strategic reserves to lower pressure on oil prices,” Mor told diplomats at an energy briefing organized by The Israel Project.
Iranian threats to block a strategic shipping channel would not be tolerated, because “blocking the flow of oil through the Straits of Hormuz basically is an act of war,” he said. “The U.S. and several other countries are maintaining a military presence to secure the flow of oil through the straits.”
Mor noted that 2011 saw oil rise to its highest average price ever, and the world hunger for energy was still growing at a staggering annual ten percent, led by India, and China – which recently surpassed the U.S. as the world’s largest consumer of energy.
He noted that the law of supply and demand means that oil supplies will never be depleted because in the future the price of oil will be so high that economics will dictate the shift to alternative energy like solar, wind and nuclear power.