(John McCann/M&G)
Fuel levy increases, in part to fund the fiscus shortfalls brought about in the corrupt Zupta era, are bad enough. But now there’s the additional irritation of having Trump in our pumps.
United States’s enfant terrible Donald Trump’s sanctions on Iran are hurting Opec’s third-largest exporter at 2.4-million barrels a day.
The sanctions take effect on November 4 and oil producers have been struggling to make up the anticipated difference, causing crude prices to jump to four-year highs.
Trump’s Russian counterpart, Vladimir Putin, pointed out earlier this month that, if “President Trump considers that the price is high; he’s partly right. But let’s be honest, Donald, if you want to find the culprit for the rise in prices, you need to look in the mirror.”
The sanctions follow Trump’s decision to withdraw from an international agreement to curb Iran’s nuclear programme.
This is bad news for oil importers. Fin24 quoted Suisse Group AG analysts Kasper Bartholdy and Daniel Chodos: “Oil-price increases directly harm real incomes and raise the current-account deficits of oil-importing emerging-market countries, most notably Turkey and South Africa.”
Argentina and Turkey are among the worst hit, given the drop this year in their currencies, each of which has weakened more than 35% against the dollar. Oil prices are already up more than 150% in 2018 when denominated in pesos, and have doubled in liras, Fin24 reported.
In India, the world’s biggest oil importer after China and the US, the rupee price of oil has jumped almost 50%. But Big Oil is happy. Bloomberg reports investors still haven’t forgiven oil companies for being ill-prepared for a crude price collapse four years ago.
“Perhaps more than half a trillion dollars will change their minds,” according to consultant Rystad Energy AS. “With oil above $80 a barrel as costs remain at an eight-year low, the industry is seeing green. In 2018 alone, it will rake in as much extra money as it did in the previous five years combined.”
Analysts have predicted that the US sanctions on Iran could cause oil prices to spike above $100 a barrel. The Trump administration announced last weekend that it is considering waivers for countries that reduce their imports of Iranian oil.
The European Union wants to circumvent the US sanctions. To get around the penalties, the Europeans are hoping to create a special purpose vehicle to allow payments related to Iranian exports, including oil, “to assist and reassure economic operators pursuing legitimate business with Iran,” the EU said, according to The New York Times.