Short-term prices would certainly skyrocket if an embargo did indeed occur because other producers lack the spare capacity to cover the shortfall. Under the kindest of estimates, Mexico and Norway can add only 200,000 bpd each. Angola and Russia might be able to accelerate their production plans, but neither has any spare capacity to bring on line. The two non-Muslim OPEC states -- Nigeria and Venezuela -- can add only 400,000 and 300,000 bpd. In the event of massively high prices, Venezuela could tap its vast tank farms and potentially add 1 million bpd for 70 days from existing stocks. But even this could hardly lessen the impact of a concerted effort to cut supplies to the United States by Muslim producers who collectively control over 20 million bpd of production.
Still, in the unlikely event of an actual embargo, the Muslim producers would quickly discover the weaknesses of their actions. The West is not nearly as dependent upon oil as it was in 1973. The United States consumes only 60 percent as much oil per dollar of GDP generated as it did in 1973. It is the reverse situation for most of Asia. For an oil embargo now to deliver the same level of economic shock to the West as did the 1973 energy crisis, the per barrel price would need to hit $90, a target well beyond the Muslim world's ability to deliver. Any oil embargo large enough to actually harm the West would decimate Asia, including Muslim countries, which has yet to recover from the 2001 global recession.
Additional analysis from STRATFOR.com can be found at: http://www.stratfor.com in our LINKS section.
This article is reprinted with permission from the publisher.
Still, in the unlikely event of an actual embargo, the Muslim producers would quickly discover the weaknesses of their actions. The West is not nearly as dependent upon oil as it was in 1973. The United States consumes only 60 percent as much oil per dollar of GDP generated as it did in 1973. It is the reverse situation for most of Asia. For an oil embargo now to deliver the same level of economic shock to the West as did the 1973 energy crisis, the per barrel price would need to hit $90, a target well beyond the Muslim world's ability to deliver. Any oil embargo large enough to actually harm the West would decimate Asia, including Muslim countries, which has yet to recover from the 2001 global recession.
Additional analysis from STRATFOR.com can be found at: http://www.stratfor.com in our LINKS section.
This article is reprinted with permission from the publisher.