In its coverage of the debate over Iranian oil sanctions, Der Spiegel created this chart (H/T Robert Sinn) showing the different oil prices major OPEC governments need to break even on their oil investments.
Obviously, OPEC nations have a strong incentive to see oil prices above their breakeven prices.
The lowest is Kuwait, at just under $65. Saudi Arabia, which supplies 10 per cent of U.S. oil (the most among OPECers), needs $80 a barrel.
Sinn thinks we’re unlikely to see oil prices below $70.
To be sure, oil plummeted down to $36 in Jan. 2009. But just two years later it had shot back up to $100.
Should the West impose sanctions (the EU will make a final decision later this month), the price will likely climb even higher (although given Iran gets 60 per cent of its GDP from oil revenues, as Fareed Zakaria recently pointed out, Iran is in fact unlikely to respond by closing the Strait of Hormuz). The threat of sanctions has already done so.