Developments this week
Oil prices continued to climb smartly, touching an intraday high of $123.23 in London and $106.71 in NY before settling later in the day. The Iran confrontation is again in the fore as Tehran refused an IAEA request to visit a military base where work on nuclear weapon design is allegedly underway. Thus the optimism that the economic squeeze on Iran was starting to bear fruit seems to have dissolved. Tehran is threatening to launch a preemptive attack on any state that threatens it, and the Ayatollah has reiterated for the umpteenth time that Iran is not trying to acquire nuclear weapons.
Although Iran has asked that talks on the confrontation be resumed, the peremptory treatment of the visiting IAEA delegation this week does not offer much hope for progress. For now the ball seems to back in the sanctions court with much scrambling going on amidst Iranian oil importers to find alternative sources of oil, and a way to pay for and transport the oil as the sanctions draw tighter.
The Syrian situation continues to deteriorate with government forces continuing to shell residential areas and casualties mounting rapidly. Iranian operatives are alleged to be deeply involved in helping the Assad government hang onto power. Pressure is mounting for some form of humanitarian intervention by foreign governments, thereby increasing the chances for further military confrontations in the region.
The steady increase in gasoline prices is starting to draw political attention in the US. Although the national average retail price for gasoline is about $3.59, much of the east coast is at $3.70 or above and California’s average is $4. A debate has begun about the point at which consumers will begin to make major changes in their driving and car-purchasing habits. Some are saying $4.50 a gallon will be the breaking point. The realization is starting to set in among financial analysts that $4 a gallon might become the floor below which prices might not settle again.
There is near universal agreement that the Eurozone’s Greek bail-out agreement that was reached over the weekend does not mean anything. Athens still has many more cuts to make before the money starts flowing while the mobs are back in the streets demanding an end to austerity. The economic outlook for the EU continues to deteriorate as does that for China which sends a lot of its exports to Europe.
Imports of oil into India, which imports about four-fifths of its crude, surged in January by 19 percent year over year. Some of this increase is being exported as finished products; some of the increase may be in anticipation of more trouble importing Iranian crude in the months ahead; and some may be an increased demand for oil as coal shortages have resulted in power outages in many regions.
Venezuelan President Chavez, who has been mucking around in the Middle East by sending diesel to Syria for the regime’s military vehicles, announced that his cancer has returned and that he will be returning to the hospital for another operation.