Bud's Offshore Energy (BOE)

S&P Global reports on the surge in Iranian oil production and exports. In the quote below, note the concern about the higher oil prices that might result from tightening the sanctions. If oil price concerns are driving critical foreign policy decisions, this would be a rather stunning indictment of US energy policy, which is sometimes perceived as being more hostile toward domestic producers than international adversaries.

“Before the war, US-Iranian tensions had eased, which facilitated higher Iranian oil exports. Iranian crude oil production increased 500,000 b/d from March to September 2023 — to 3.1 million b/d from 2.6 million,” the analysts said. “Biden will be under pressure to enforce sanctions and curtail Iranian export revenue. This is a challenging situation for the Biden administration, which wants more oil on the market, not less. The attacks on Israel could override the oil issue.“

There was an exchange on this topic at yesterday’s White House press briefing:

Q. I wanted to ask you about oil, if I could, and the money that it’s bringing in.  So, is the amount of oil that’s being brought in by Iran — specifically, records amount, 85 percent to China, more oil being sold above the price cap from Russia — giving the President any pause on changing these energy policies for fossil fuels here in the U.S.?

MR. KIRBY:  I would — just let me back up a little bit.  I mean, it’s important to remember that Iran gets most of its oil revenue off the black market and evad- — evading sanctions, which they do.  It’s costly to them.  In fact, our evidence is that they really only receive a fraction of the market value of the oil that they sell, because they have to sell it on the black market. 

We will always, as we do in any case, typically, revisit sanctions regimes to see if they need to be changed or adjusted, specifically with respect to Iranian oil.

The President, since the beginning of the administration, has been concerned about making sure we have a viable global market for oil, working hard to keep the prices of gasoline down here in the United States.  Part of that is making sure you remove some of the volatility in that global supply and demand. 

I don’t have any announcements or decisions to make today with respect to any changes to the domestic oil production. 

Q    But isn’t it a national security issue when you have countries that are profiting off of oil and the increased price of oil that don’t like Israel, that don’t like America?

MR. KIRBY:  We don’t want, for instance, Russia to be able to — to get a windfall in profits from the oil market so that they can then turn that around and — and apply that to weapons in Ukraine.  We certainly don’t want to see Iran do — be able to do much of the same, which is why we’re — we’re putting as much pressure on them as we are.

Q    So, why not increase oil production here?

MR. KIRBY:  I — again, I don’t have any announcements to make today.

On a related note, the Strategic Petroleum Reserve has remained at historic low levels. The current volume is 351.3 million barrels, a slight rise from the low of 346.8 million barrels in July, the lowest volume since 8/19/1983 when the SPR was still being filled. Have the oil embargoes following the Yom Kippur War, the reason for the SPR’s existence, been forgotten?

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