Oil and Iran, follow up post

 I realized I needed a follow up to this post after talking about this on various forums and chatting with some friends. There is some information I've forgotten to add which would paint a more complete picture, and maybe give people a better idea why I'm thinking like this. Also, I should mention I'm not saying this is how it's going to happen but that it's one of the overlooked possibilities.

I too am sure oil is going up in the short term. My problem is I don't think it is staying there. A spike in oil will cripple the US economy right now and cut demand too hard. This would cripple the global economy and sink Europe for sure. Demand would evaporate overnight and those long oil bets would get their throats slit. That trade is going to be too hard to keep up with for me to feel good about it.

Something I believe too many folks are overlooking is that Iran is opening it's oil bourse on 3/20 this year. They'll be trading their oil on an open market, without US traders (read speculators), with limited competition, for non dollars. With China and India being their biggest customers I really can see them bidding the price of Iranian oil down simply due to lack of volume in that market.

There are three ways I can see that playing out excluding US intervention.

1. China and maybe India get discounted oil from Iran. While this will most likely lower the price of oil for everyone, it won't be as much a discount for the world as it is for China. This is bad for the dollar and China gets an energy edge on us. While oil is lower for others, it rises or remains flat in the US. Interest rates have to rise to cover the lack of T-Bill buyers, crapping all over the fake recovery we have going in the US.

2. China and India and a few other players bid Iranian oil up to current market price. This creates a lower demand for the dollar and increases the price of oil for US customers. Interest rates have to rise to cover the lack of T-Bill buyers, crapping all over the fake recovery we have going in the US.

3. There is very little interest in the oil bourse and not much happens because of it. Though, if the interest in Iraq and Libya's oil schemes is any indication this is unlikely to happen.

With US intervention anything is possible. Anything from the above still happens to WWIII.