Sanctions risk rerun of oil’s 2011 flash crash

Soaring oil prices and the loss of exports from South Sudan, Syria and Iran pose awkward questions for investors and policymakers.

Last year, a similar surge following the outbreak of the Libyan civil war eventually resulted in the flash crash on May 5 and the decision to release emergency stocks by the United States and other members of the International Energy Agency (IEA) on June 23.

Investors and policymakers are being pressed to explain why the outcome this time will be different.

The problem is that the circumstances are nearly identical.

The IEA is struggling to explain why it made sense to release stocks following the Libyan outage but does not make sense to release them following the loss of production from South Sudan, Yemen and Syria, and the tightening stranglehold on Iran’s exports.

[…]

But this argument ignores the losses of oil from South Sudan, Syria and Yemen, and Iran’s growing difficult in finding buyers for its crude, which appears to have cut the country’s exports by several hundred thousand barrels per day. The tightening timespreads for Brent imply those losses are just as real as in 2011. If the release of 60 million barrels was justified last year, it would seem to be justified again in 2012.

[…]

I wonder when Newt and the rest of the demagogues will admit that their hawkishness on Iran has more to do with expensive gasoline then some EPA regulation.