European Union (EU) nations in Brussels agreed on Monday to issue an oil embargo against Tehran in an effort to squelch the country's alleged nuclear weapons program, reported the Associated Press. In retaliation, two Iranian lawmakers raised threats the country would block the Strait of Hormuz. The vital link between the Gulf of Oman and the Persian Gulf carries a fifth of the world's crude oil.
The EU sanctions call for an immediate embargo on new contracts for Iranian crude oil and petroleum products. Existing contracts may continue until July.
Shuttering the Striat would have major implications for the world economy and on the prices of oil, which "increasingly are set by global supply-and-demand trends," reported The Wall Street Journal in "Oil Fields Gushing in the U.S."
The Blaze reported that several analysts have noted that the United States could temporarily meet its energy needs with its oil reserves at 98 billion barrels, ranking seventh in the world. Europe's economy, on the other hand, would not be able to cope; it ranks 24th in the world with 5.1 billion barrels.
While prices of crude-oil are expected to skyrocket should Iran effectively block the Strait, futures were still lower Wednesday due to concerns over oil demand, reported The Wall Street Journal. "Concerns about demand have evidently regained the upper hand on the oil market, which would explain the below-average performance of oil prices in recent days, despite the [European Union] oil embargo against Iran and repeated threats by Iran to close the Strait of Hormuz," Commerzbank said in a note.
Previously, The Blaze warned, "If Iran keeps its promise and cuts off an estimated 12 million barrels of oil per day, don’t be surprised if the price of crude approaches (or surpasses) $250-300 per barrel."
If Iran does temporarily choke the Strait of Hormuz, the implications for the United States, including oil-producing tribes in the northern plains, are still unclear. But it's likely the U.S., the world's largest oil consumer, would look to increase its imports from India and other countries, as well as to its own backyard.
"The U.S. Energy Information Administration is likely to raise by a substantial amount its existing estimate that U.S. oil production will grow by 550,000 barrels per day by 2020, to just over six million barrels daily," reported the Journal.
The forecast will include new production from the Bakken shale area in North Dakota, where oil companies are successfully extracting energy through hydraulic fracturing, or fracking (which entails pumping water down a well with sand and chemicals to crack rock and release oil). The Mandan, Hidatsa and Arikara Nation (MHA Nation) sits on top of the Bakken, a shale rock strata covering parts of Montana, North Dakota and Canada. The area could hold as much of 4.3 billion barrels of recoverable oil.