What happens to oil if Trump tears up the Iran deal? – The Property Chronicle
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What happens to oil if Trump tears up the Iran deal? Why poor countries could be cheering Donald Trump if he tears up the Iran deal

Political Insider

For all Boris Johnson’s best efforts to persuade him otherwise, President Trump seems likely to pull the United States out of the 2015 Iranian nuclear agreement, formally known as the Joint Comprehensive Plan of Action (JCPOA).

This weekend Rudy Giuliani symbolically ripped up a copy of the JCPOA when speaking to a conference of the Iranian opposition in Washington D.C.

The former New York mayor is now part of President Trump’s legal team and his views are shared by many in the White House, including National Security Adviser John Bolton and other Iran hawks like Secretary of State Mike Pompeo and Secretary of Defense James Mattis.

Tearing up the deal would mean the resumption of the sanctions first imposed in 2012, and severely limit oil production from the third largest oil-producing country in OPEC.

The impact on the oil industry would be huge. Were sanctions to resume it could mean somewhere between 300,000-500,000 fewer barrels of crude oil per day by the fourth quarter of this year.

A study published in Energy Economics in 2016 offers the rosiest picture of what could happen if large amounts of oil were to disappear. It noted that generally when Iranian oil production is withheld from the global market it does not result in a long-term price increase. Saudi Arabia usually rebalances the market by increasing its production to cover the lost Iranian supply.

This time, however, the Saudis might not increase production. In fact, some studies suggest that given the Kingdom’s high spending and low tax revenues, the Saudi government needs the oil price to rise to around $90 a barrel to avoid running a deficit.

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