International oil price fluctuations increase economic uncertainties

The situation in the Persian Gulf has been tense recently, but the United States and the European Union have not yet made a decision on curbing Iran’s oil exports. If the situation further deteriorates, the United States and Europe may impose an oil embargo on Iran, the international crude oil price will face an increase, and the uncertainty of the international oil price fluctuations on the economy will greatly increase.

Iran is the world’s major oil country and has confirmed that its crude oil reserves rank fourth in the world and its natural gas reserves rank second in the world. In 2010, Iran exported 2.087 million barrels of crude oil per day. It was the third largest oil exporter after Saudi Arabia and Russia. Exports accounted for 9% of OPEC's total exports and 5% of global crude oil exports. The amount of 2.4%. Libya produces less than half of Iran’s crude oil (43%) and exports only 3% of global exports. More importantly, Iran also occupies an important geographical position and adheres to the Strait of Hormuz, which is an important oil transportation route in the world. In 2009, the oil transport volume in the Strait of Hormuz accounted for 33% of the global oil shipping volume, and the global oil trade. 17% of the amount is enough to affect important oil-producing countries such as Kuwait, the United Arab Emirates, and Saudi Arabia to deliver crude oil to Western Europe, Japan, the United States and other developed countries.

If the economic sanctions against Iran evolve into large-scale conflicts, the global crude oil supply will inevitably be greatly affected, and oil prices will also rise sharply in the market panic. In fact, the uncertainty of the Iranian issue alone is enough to make oil prices firm. If there are other unstable factors in the Middle East, the situation may be more complicated.

What impact will the Iranian oil embargo have on the United States and the European Union? In 2010, EU crude oil demand accounted for 16% of global crude oil demand, and US crude oil demand accounted for 21% of global crude oil demand. Of Iran’s crude oil exports, 18% (January 2011 data) was exported to the EU. Of the U.S. crude oil imports, 49% came from the OPEC countries. Therefore, if Europe and the United States want to take any action, they must first fully consider the consequences. In any case, the uncertainty of the Iranian issue alone is enough to cause the rise in oil prices, which will cast a shadow on the economic recovery of the world, especially the western countries. The second oil crisis at the end of 1978 was related to Iran. Global oil production plummeted from 5.8 million barrels per day to less than 1 million barrels a day, which was one of the major causes of economic recession in the developed countries in the late 1970s. Of course, the impact of the oil on the global economy is no longer that big, but there is no problem in supporting price increases.

The international oil surplus productivity is not actually a lot, Iran's impact on the international oil market will be substantial, and its impact on China is also substantial. China is Iran’s largest crude oil importer. In 2010, Iran’s crude oil exported to China accounted for 22% of its total exports, and 8.9% of the country’s total crude oil imports. Moreover, we currently rely on foreign oil more than 55%, of which 47% come from the Middle East. If the international oil price rises greatly, we will spend roughly 1 trillion yuan each year on the basis of the current oil import volume and international crude oil prices. The international oil price rises by 10% is 100 billion yuan, and the price risk is also very high. It is therefore necessary to assess the potential impact of Iran’s oil production cuts and propose solutions.