Strike on Iran would cause "all hell to break loose" in world oil markets

This is off The Washington Post:

A U.S. military strike against Iran would have dire consequences in petroleum markets, say a variety of oil industry experts, many of whom think the prospect of pandemonium in those markets makes U.S. military action unlikely despite escalating economic sanctions imposed by the Bush administration.

The small amount of excess oil production capacity worldwide would provide an insufficient cushion if armed conflict disrupted supplies, oil experts say, and petroleum prices would skyrocket. Moreover, a wounded or angry Iran could easily retaliate against oil facilities from southern Iraq to the Strait of Hormuz.

Oil prices closed at a record $90.46 a barrel in New York yesterday as the Bush administration tightened U.S. financial sanctions on Iran over its alleged support for terrorism and issued new warnings about Tehran's nuclear program. Tension between Turkey and Kurds in northern Iraq, and fresh doubts about OPEC output levels also helped drive the price of oil up $3.36 a barrel, or 3.8 percent.

Oil traders said that even if the chances of military conflict with Iran were small, the huge run-up in oil prices that would result encourages some speculators and investment funds to bid up the price of oil, adding a premium of $3 to $15 a barrel.

"It will be chaos. . . . I can't really see it," said Abdulsamad al-Awadi, an oil trading consultant and former executive at Kuwait Petroleum. "Having been in the marketplace for almost 30 years, I can't see a scenario for it. Or precautionary measures [that oil companies could take]. There are no precautionary measures."

"If war breaks out, anticipate that all hell will break loose in the oil markets," said Robin West, chairman of PFC Energy, a Washington oil consulting firm.

There is not much else to say here, except that a U.S. strike on Iran would certainly cause oil prices to spike well above $100 a barrel--perhaps $110 to $120 a barrel. And along with oil prices, you can expect gas prices to spike as well. The scary thing here is that we've got Vice President Dick Cheney practically demanding a U.S. strike against Iran:

Although the Bush administration is not openly threatening a military strike against Iran, the president recently spoke of needing to avoid "World War III," and Vice President Cheney said that the United States would "not stand by" while Iran continued its nuclear program. "We will not allow Iran to have a nuclear weapon," he said. Yesterday, Secretary of State Condoleezza Rice said that Bush is "committed to a diplomatic course on Iran," but she added that U.S. patience is "not limitless and allies need to know that."

"These crises have a habit of bursting on the scene and leading to unforeseen places," [Deputy executive director and chief economist of the Center for Global Energy Studies Leo] Drollas said. "Everyone wants it not to happen, but it's like a crash happening slowly. You can see the two cars coming toward each other . . . There's an inevitability about it."