The Blog

Surowiecki on Oil and Iran

2:54 PM, Feb 13, 2007 • By MICHAEL GOLDFARB
Widget tooltip
Single Page Print Larger Text Smaller Text Alerts

Lee Smith, a Hudson Institute visiting fellow, contributes frequently to THE DAILY STANDARD. He writes in here with a few thoughts on Iran, oil, and the New Yorker magazine.

My old friend James Surowiecki has target=_blank>an interesting column in the latest issue of the New Yorker that explains how tough talk from the government sometimes aids our enemies, specifically the Islamic Republic of Iran, whose war chest gets fuller every time the risk premium on oil increases.

Surowiecki explains:

When buying and selling oil, traders don't just look at today's supply and demand. They also try to forecast the future. And if buyers think there's a chance that supply is going to be lower down the line--because, say, Iranian old fields will be shut down--they will be willing to pay a higher price today in order to guarantee that they will have the oil they need. . . . [W]henever the US says things that make a military conflict with Iran seem more likely, the price of oil rises, strengthening Iran's regime rather than weakening it.

Surowiecki has hit on one of the key dilemmas the White House faces in dealing with Tehran: How to let an ideological regime that does not recognize American red-lines know that Washington does not intend to abandon its position in the Persian Gulf or forsake its regional allies. After all, many of those regional allies, like Iran, depend almost exclusively on oil revenues, and any sign of American disengagement from the region would, just as surely as any escaltion, result in shockwaves of panic through financial markets across the globe.

And now that Surowiecki has laid out some of the geopolitical dangers of rhetorical over-reach, one wonders if that will affect the status of his New Yorker colleague, crack reporter Seymour Hersh. Intentionally or not, Hersh has contributed as much as anyone in Washington to the idea that Washington is planning a preemptive strike on Tehran. When Hersh reported that the "neocons" were mulling over plans of a nuclear first strike against Iran in the magazine's April 17, 2006 issue, newsstand sales likely soared, but what about the price of oil? In characteristic Hersh fashion, the story was based largely on anonymous quotes from unnamed officials--the claim was just a sensationalist peg for one in a series of overheated Hersh articles about Washington's Iran plans. But if Hersh's employers insist on taking seriously his feverish and un-sourced description of the White House's decision-making process, at least their financial columnist has explained some of the stakes involved in doing so--if that matters.