Donald Trump’s Iran sanctions are driving up the price of oil. A number of companies are withdrawing prematurely from business with Iran for fear of the United States. This also has noticeable consequences in Europe.
ALately, car drivers have been paying more and more for gasoline and diesel at the gas station. The General German Automobile Club (ADAC) reports that the prices for fuels are “rising incessantly” in its weekly price statistics. According to ADAC, a new high for the year was even reached on Wednesday: Super E10 cost an average of 1.494 euros per liter. And for diesel, drivers had to pay 1.334 euros per liter. That was even more than in the previous week. You have to look back a long time when fuel was last so expensive – until the second half of 2014.
The price of heating oil is also racing from record to record; even if that is not so hard for consumers in Germany at the moment, because you don’t necessarily have to buy heating oil in the middle of summer. A price peak of 77 euros for 100 liters had already been reached on Tuesday, according to the Internet platform Heizoel24.de. According to the Check24 internet portal, the average value for August was at least a four-year high.
Corporations fear the United States
The main reason for this is the rise in crude oil prices. However, according to ADAC, the mineral oil companies are also trying to expand their margins in such times, with varying degrees of success. The price of North Sea Brent crude oil had risen from $ 71 to just under 78 dollars per barrel (159 liter barrel) since mid-August. In any case, the exchange rate between the dollar and the euro, which can sometimes counteract the rise in oil prices, did not have such a strong opposite development. Oil experts like Jan Edelmann from HSH Nordbank now expect the oil price to exceed at least $ 80 again in the coming months. Temporary price peaks of 90 dollars can no longer be ruled out.
The decisive factor that makes oil, gasoline and heating oil so expensive at the moment is said to be the Iran sanctions, which American President Donald Trump has revived. The first part of the sanctions, which should not affect oil deliveries yet, is already in place. The second part, which is specifically intended to hit the oil industry, will not come into force until November 4th. However, many companies are apparently afraid of the United States and fear disadvantages in dollar transactions – and have therefore already discontinued their ties to the Iranian oil sector. In any case, falling numbers have already been reported for oil production in Iran as well as for oil exports from Iran to other countries. The information service provider Platts reports that Iran exported only 1.9 million barrels of oil per day in August, in July it was still 2.3 million barrels per day and in June it was even 2.5 million per day. “Since Iran has stored oil in tanks on land and on ships, production has so far fallen less than exports,” says Giovanni Staunovo, oil specialist at the major Swiss bank UBS.
The relationship with China
However, exports from Iran to Europe have already declined noticeably. In July, an average of only 410,000 barrels of oil per day was exported to Europe. Last year it was an average of 750,000 barrels a day. “So the sanctions are already having an effect here,” says oil analyst Edelmann.
In contrast, exports from Iran to India and China have recently increased. The analysts report, however, that the increase was not particularly high. The extent to which China steps in as a buyer of oil from Iran instead of America will depend largely on how the trade conflict with the United States develops. “If there are further import tariffs on Chinese goods, China is likely to import more Iranian oil,” said analyst Edelmann. On the other hand, if the relationship eases, China is likely to import more American oil and reduce Iranian barrels.
Since the beginning of April, oil trading in China’s renminbi instead of dollars has increased significantly. This could indicate that China is circumventing American sanctions, it said. But that has not yet been properly proven.
Insurance companies are turning away from Iranian imports
Other countries do not necessarily want to adhere to the American sanctions either. India and Japan, for example, were talking about exceptions, said analyst Staunovo, and the European governments also wanted to see the Iran nuclear deal continue. “Only one should remember with European companies, as well as with South Korean and Japanese companies, that they did not want to end up on any American sanctions list because they would then be unable to make payments in the dollar financial system,” said Staunovo. “That is also the reason why exports are already falling.”
In addition, insurance companies are often no longer willing to insure oil tankers with Iranian oil. Therefore, Iran must increasingly switch to its own fleet, the analysts report. Iran is already delivering oil to China and India using Iranian state tankers. Analyst Staunovo believes that all Chinese and Indian oil companies involved in America are no longer willing to import Iranian oil. The others, however, apparently continued to buy oil: “That is why Iranian exports will not fall to zero – but the decline in exports and production should still be significant because of Europe, Japan and South Korea.”