11 January 2012

Iran and the West Rediscover Oil as Weapon

By Alexander Jung and Bernhard Zand

Four decades after the 1973 oil shock, Iran and the West are once again embracing oil as a weapon. Tehran is threatening to block the Strait of Hormuz, while the industrialized countries are considering a boycott of Iranian oil. But both sides will suffer if such tactics are used.

Surprisingly enough, supertankers don't burn very well. Although the crude oil they transport is highly flammable, there is not enough oxygen in their tanks to create an explosive mixture.

On average, 14 of these giant tankers pass through the Strait of Hormuz, located between Iran and Oman, every day. If Iranian President Mahmoud Ahmadinejad actually ordered his forces to fire missiles at one of these tankers, quite a bit of firepower would be needed to set off a Hollywood-style inferno.

But the verbal attacks from Tehran are more than sufficient to set the global markets ablaze.

Last week, prices climbed significantly above the $100-a-barrel mark once again, despite all gloomy economic forecasts. Gasoline prices already reached an all-time high in Germany in 2011. And now the dispute over who controls the Persian Gulf, which has been triggered by Iran's nuclear policies, is a sign that further escalation is on the horizon.

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