Beyond Joe Biden’s declaration during the final U.S. presidential debate that he understands the need for a transition off oil, there’s something else for fossils to worry about in the event that Biden wins the White House.
There’s a strong possibility Biden would reinstate the nuclear deal with Iran that President Barack Obama concluded in 2015, while Biden was VP. Depending on how and how quickly that happened, the crushing economic sanctions Donald Trump subsequently imposed on the country “could eventually be eased, opening the sluices for more than two million barrels a day of Iranian crude exports,” Bloomberg reports.
The prospect “that major producer Iran may regain its role in international trade” would be a major headache for fossils scrambling to survive in a “fragile” global oil market, the news agency adds.
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“The timing for the oil market is fraught,” Bloomberg explains. “The OPEC cartel, which includes Iran, is restraining supply to prop up prices as the coronavirus ravages demand.”
But if Biden’s wins, “Wall Street banks including Goldman Sachs Group Inc., JPMorgan Chase & Co. and RBC Capital Markets LLC foresaw one million barrels a day or more of Iranian crude hitting the market next year.”
That increase in supply, without a corresponding hike in demand, would drive down oil prices that are already low enough to be a serious threat to fossil companies’ survival. Last week, analysts at Rystad Energy projected that fossil bankruptcies in North America alone will likely exceed US$100 billion this year, while the Financial Times had European fossil stocks falling by €360 billion while renewable energy companies surged.
“In Tehran, the country’s leaders aren’t saying how much or how soon they could boost output and exports should the U.S. rejoin the nuclear pact—known as the Joint Comprehensive Plan of Action—and start peeling away sanctions,” Bloomberg writes. And the longer it takes, the less powerfully it might shift global oil prices—although analysts say they’ve yet to price that impact into their price forecasts.
“A U.S. president has authority to ease sanctions through executive orders or by issuing waivers that allow the purchase of Iranian oil,” and “sanctions waivers might serve as a sweetener for Iran to return to talks,” the news agency adds. Then again, a move along those lines could trigger a reaction from other petro-states in the region, including Saudi Arabia, as lower prices cut into their oil revenue.
