Want to know what war with Iran looks like? You're getting a nice preview here. This is not the paper tiger Iraq was. This is the real deal.
Iran took a step on Friday toward establishing an oil market denominated in euros, a plan analysts described as highly unlikely to materialize but which in theory could have serious consequences for the U.S. economy.
Iranian state-run television said the country's oil ministry granted a license for the euro-denominated market, an idea first floated back in 2004, though just who would trade on it remains unclear.
If the market were to succeed — or if Iran simply demanded payment for its oil in euros — commodities experts said it could lead central bankers around the world to convert some dollar reserves into euros, possibly causing a decline in the dollar's value.
Oil is currently denominated in dollars around the globe, whether through direct sales between producers and consumers or in trades made on markets in New York and London.
But if one day the world's largest oil producers allowed, or worse demanded, euros for their barrels, "it would be the financial equivalent of a nuclear strike," said A.G. Edwards commodities analyst Bill O'Grady
May 05, 2006
Checkmate. Iran seeks Euro-denominated oil market
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23 comments:
Keith,
You missed a good part of the article to quote (not sensational enough?),
O'Grady said there are practical reasons why the Iranian threat is an empty one.
For starters, Iran is not a very attractive site for a market, given the volatile nature of its politics, the U.S. sanctions against it and the lack of a fair legal system. Moreover, there is no indication that the
European Union is interested in vying to become the world's central bank, which requires a willingness to run large currency deficits, he said. For the U.S., that has meant allowing cheap imports to undermine the strength of some major industries, including textiles, autos and electronics manufacturing.
PFC Energy oil analyst Jamal Qureshi said the fears stirred up by a hypothetical euro-denominated oil market in Iran or anywhere else are overblown, not least because the oil trade is just a small component of the overall global economy.
keep your head in the sand osman - it's nice and warm and safe down there
We adults will be having an intelligent discourse in the meantime
God help me from feeding these trolls! I just love the osman though - sure makes our case for us doesn't he?
shouldn't osman be selling houses?
This is troublesome even if (as Osman pointed out) this is a probable empty promise.
The troubling part of it is that people are starting to comptemplate another world currency instead of the dollar. Once the floodgates are open and the shift from the dollar starts we will be in a world of hurt.
Dams don't bust. They start leaking through a small crack which develops into a deluge that weakens the entire structure causing collapse. Let's hope this is not the crack in the dollar.
There are many who believe the true reasons for a war on Iran is this Euro Bourse.
It is
Keep in mind that the more the dollar devalues the more expensive foreign goods seem to us Americans and the more reasonable American products seem. Then if places like China and Latin America start pegging their currencies to the Euro their products will start to get more expensive too. Before you know it our trade deficit will disappear as American goods and services seem like international bargains.
Only problem is the price of imported oil sold in Euros will seem to skyrocket from our point of view.
A devalued dollar will cause commodities to skyrocket. Any gains we have would be washed away by massive inflation
I have a 200,000 fix mortage and a boat load of silver. I will pay off my mortgage and the money saved in a payment will "deal" with inflation....so while I agree inflation will eat at profits - debt (like a mortgage) is good to rising commodities. Once again - THANKS TO THIS GREAT HOUSING BUBBLE I got capital for silver and gold!!!!
Keith, I made your case by pointing out the unsensational part of the article you cheerfully skipped over?
Richard, I am selling houses. 90% of my work is now online. Driving a truck through Keith's bubblicious sky-is-falling world is my stress relief.
p.s. 4 closings scheduled for the end of the month.
osman - what are the details of the closings - like asking price/selling price/days on market?
Osman, get back to us when they atually close. What are the contingencies on the sales? Anything about the buyers being able to sell their current houses?
IOW, don't brag about your chickens before they hatch.
I don't think oil in Euros would cause central banks to need to hold Euros. They have currency exchange markets...no physical currency changes hands or needs to.
Japan buys $150 billion of oil per year but they own 2 trillion of US paper assets. Why? Do they "need" 14 years of oil money?
It's somewhat psychological. The dollar may fall if people perceive it to not be the defacto world currency. But oil in Euros wouldn't cause there to be a huge physical demand for Euros.
Does anyone have info regarding the options available for purchasing oil via on-line discount brokerages a la e-trade, scott trade, ameritrade?
Not one drop, so get you bike out anf fill the tires with air, you going to need it!
http://tinyurl.com/ga6nj
A P.A.S agreement is just that financing for the loan is another ball game in itself as you know.
You get the purchase and sale agreement
MB: said.to borrower: "So how's your credit"
Borrower: Not bad you know I am only human, I have a few lates here and there.
MB: ok let's have a look, oh wait you didn't mention you filed bankruptcy last year.
Borrower: Oh that matters?
closing down the tubes.
It was widely rumored that this is precisely what Sadam was threatening to do right before Bush invaded. Now he is barking at Iran. Interesting.
c in abq/richard,
If you want market stats I'll publish April's in a few days.
As for specifics, I don't divulge details of confidential client transactions.
You're absolutely right though, never count the revenue till the deal is closed. Real estate deals are notoriously unstable. I was simply responding to richard's barb. Those are deals scheduled to close by the end of the month.
The issue is bigger than Iran. Iran may wish to undermine the dollar, but they are to small since this is an issue with the larger currency markets.
As long as there is a conversion between Euro's and dollars (people willing to take the trade), abritrage will keep the Euro Oil in the same band as $ Oil.
The real issue is *if* there is ever a US currency crisis. In this case no one will want to take the Euro - $ trade, and the Euro - Oil market will *then* be independent of the $ - Oil market.
So Iran may wish, or prepare for such a $ crisis, but they alone can not force it, as much as we can't pop the RE bubble by ourselves. The greater market forces will decide the outcome.
(There, I mentioned Real Estate!)
hmm .. having lived in the mid-east for a while .. I can tell you that it doesn't take much to excite the Arabs, and the muslims in general. They are very emotional people, and a lot of their decisions are based on emotions.
"Monkey Bush" has done an exceptional job at pissing off a lot of arabs and muslims around the world .. and they are real eager to get back at the US .. be it physically or financially ..
so .. if Iran does push the oil market towards Euros, and somehow succeeds, a lot of other oil-nations are sure to follow .. and it won't stop at oil ..
Is it time to start loading up on pennies for melting or am I getting ahead of myself? The penny is currently worth 0.9 cents in zinc and copper. If the dollar continues to trend down and copper up will we see a change in our penny? I would put some more in the closet if it weren’t for all of my wife’s shoes.
Tom
Keith, let Osman have his opinions and don't attack him for doing so. His opinions serve purposes for all those who reads them, whether they agree or disagree with him. They can decide for themselves.
Another interesting article concerning Iran and the oil bourse can be found here.
http://www.321energy.com/editorials
/chapman/chapman050806.html
Tom
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