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What do sanctions mean for oil prices?

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    Brigham McCown on Western sanctions affecting Middle East oil prices

  • Duration 6:14
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Back okay oil -- today oil prices are 89 dollars and 78 cents and we are talking oil and the chaos in the Middle East with a guest joining us right now from the Dallas bureau Brigham account.

Former official at the Department of Transportation -- hi thanks for coming on.

I learned thanks for having me on the show.

All right so obviously and it always is the crude oil market is pretty volatile.

And right now what do you think is bigger concern weakening demand for oil and supply seems plentiful -- supply -- not so plentiful because of this past in the Middle East particularly the western sanctions upon.

Right well there's three factors affecting crude oil prices right now number one yet continuing unrest and bad news coming out of the Euro zone two you've got the Saber rattling in the mideast and instability in Syria and Iran.

And then third frankly there's a question about the US energy policy and where we're gonna go with development of fossil fuels here in North America and all three of those are having an impact.

Yeah most definitely -- it was Clinton line tackle first.

-- -- All right let's -- it okay so they threatened to close the Strait of Hormuz and isn't that the passage way.

That's responsible for like it's a third of global seaborne oil trade out there.

It is straits of Hormuz is a narrow -- by which everything coming out of the Persian gulf needs to float.

Typically it's -- -- a higher percent like you've mentioned I think last year though it was down to just a little over 20% of oil production and that's gonna be good and diminished somewhat as the United Arab Emirates just opened a pipeline connection to -- Ira.

Outside interest rates by Democrat if you date back to the Iran Iraq War we've had constant threats of disruption of shipping through that area I've been through that area myself several times.

Yes okay so how much of a threat achieving that is to that -- market and eventually to the price we -- to fuel our cars.

-- -- has a direct impact on the price we pay in fact if you look just before the fourth of July weekend gas was.

Have been coming back down and -- with.

Saber rattling out of Iran right it spiked right through the fourth and kept going.

I now as immediately -- -- -- the national average at step up at this time last week yet you've got it is.

Yes no not at all no it is up and that's part of the issue is that the futures markets and the traders they pay attention to what people say just like.

You can't talk about the Euro zone here -- and that's why the markets up so well today because of positive statements coming out of there but.

You know you've had the Iranian Revolutionary Guards you've had the foreign policy minister and other saying well maybe we'll close the straits maybe we -- And frankly without a without a counter argument from the US that very much affect prices.

Right OK so but you have those EU sanctions in US sanctions on Iran being effective.

No I don't think they have been effective yet and I don't think they will be effective ultimately if the idea is to change Iran's behavior.

The only way sanctions work is to to make an airtight and then not grant exemptions and not to allow others to go around and so.

You know I I don't see that the sanctions are going to be effective.

Yeah.

It's RA -- here last -- at Brigham.

Okay so.

What what can the US in the western world do.

Well you -- I'm a firm believer that the proactive engagement is better than than trying to isolate -- country to try to modify their behavior but.

The fact is Iran is very unpredictable -- they have been unpredictable for a very long time but.

They're not stupid either right so they are not going to directly confront the US military in the Persian gulf.

What about Israel and all that's.

Well there's there is a risk and I think there's very real risk about nuclear proliferation in Iran and how that affects Israel and you know the best thing the United States can do is to follow a policy of proactive engagement to -- to settled down.

The volatile areas and even more importantly than that we need to continue to reduce our dependence.

On overseas oil and continue to explore and offset that with North American production OK so what happens to keystone -- now.

Keystone.

Has been in the news and you know there's another bill in the House of Representatives to.

To move -- for -- keystone needs to be approved and it's been a political.

-- hot potato the president is in a tough spot he has organized labor that wants him to build the pipeline.

But he's got certain environmentalists on the other side that are opposed to.

Canada developing the oil sands and really the issue has nothing to do with -- down and everything to do with whether or not Canada.

Should explore for oil and they're gonna do it whether we buy it or not.

-- and there right next cent Canadian sat next an island gas producer just -- to that.

Huge fifteen billion dollar deal with one of China's largest oil producers that shows -- China trying to get into the North American market.

Even the -- Mexico to find more sources of oil to fuel there growing population.

Absolutely and and frankly the US has had a little bit of a black guy with our great trading partner partner to the north in Canada in China.

Shutting -- this for so long and you know frankly candidate would much rather sell its -- here to the US and the manufacturing jobs that would come from refining the oil here in the US cannot be understated its real economic growth.

It's frustrating I don't know who else has proposed an almost eight billion dollar private project.

In these economic times in the US has said no so far makes no sense.

Yet last question for -- 102 answer.

Syria is Iran's ally with the bombings there last week we we make that.

Well I had what I make of that is we need to be careful because just because we're anti.

Assad doesn't mean the next people that would come along are going to be any better frankly they could be worse.

Cuts at Brigham -- -- former official at the Department of Transportation thanks for bringing us that oil -- on -- involves -- market in crude oil.

But that's gasoline prices guys that affects the food -- the car you drive and everything else thank you so much.

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