Oil Embargo Seen Unlikely; Not Ruled Out
An embargo would restrict supply and likely cause price increases. The price of diesel fuel, which is of vital importance to trucks, rises and falls with the price of crude oil.
An embargo implemented in the 1970s crippled the U.S. economy, triggering double-digit inflation that permanently affected some price structures. Transportation modes that use oil-based fuel like trains and trucks were faced with huge price increases and periodic shortages.
While analysts told the Associated Press on Wednesday that an Iraqi-led embargo would almost surely fail, the escalating conflict between Israel and the Palestinians has kept oil markets on edge.
Some of the concern about an embargo was calmed by data from the American Petroleum Institute showing an unexpected buildup in U.S. inventories of crude oil.
Even so, oil for May delivery was fetching a price of more than $27 a barrel on the New York Mercantile Exchange, Wednesday, the AP said.
Peter Gignoux, head of the petroleum desk at Salomon Smith Barney, scoffed at the idea that Iraq would be able to organize an effective boycott of oil exports to Western customers, but Iran's Foreign Minister Kamal Kharrazi said in Malaysia that such a boycott could work if it had backing from many oil producers.
U.S. crude prices have jumped 36% since the beginning of February, and consumers are likely to see higher prices at the pump as the peak summer driving season approaches.
