$55 to $84 million - that’s an estimate of Iran’s increased revenues from abducting the UK sailors over the past seven days. I compared each day’s close to last Wednesday’s close (before the abduction) and multiplied the increase in oil prices by the barrels per day (bpd) of Iran’s oil production. The range comes from the difference between its OPEC quota of about 4 million bpd and the actual shipments of about 2.6 million bpd. It isn’t fair or correct to assume that all the price differential over the past week was due to Iran, but I used it for the sake of this post anyway. Additionally, I had to assume that they were selling their production at spot prices rather than previously contracted amounts and that is oversimplifying things as well.

I am sure that the Iranians will have some costs associated with this maneuver but I just wanted to point out how much of an incentive Iran has to play war games with oil as its primary weapon. The past seven days was the proverbial “shot across the bow” in my opinion. I doubt it has much to do with mid-sea boundary disputes or trespassing or even making extra oil profits for Iran. Instead, Prez Imanutjob is sending a message to the Wicked Western World that this is a sample of what we will get by pressuring them. About 40% of the world’s oil is shipped through the Strait of Hormuz and whether we like it or not, we are at Iran’s mercy there. It’s easy for anti-Americans or anti-war activists to claim that the US government loves to go to war for oil. True or not, that’s the perception. Iran is just pushing those buttons and if they go to war with oil, the same crowds will likely find a way to blame the US for it. That’s just the way it goes. Until we do a better job increasing domestic supply, reducing our demand or developing an alternative fuel, this situation will not improve.