Iran Set to Turn Off Oil Supply to Europe

[mAd_ScIeNtIsT]

Re: Iran Set to Turn Off Oil Supply to Europe

@nikhil25

why do you think china is obligated or inclined to make up the difference? in your example, you assume saudi arabia is incapable of servicing a higher demand. or perhaps you assume iran would entice china with a heavily discounted price.

I’m not saying that China is obligated to, but the effect of Iran not selling oil to Europe is that there will be be less demand for Iranian oil - (because European demand will be taken out of the equation). Because prices of commodities are higher when demand is higher, this means that Iranian oil will be slightly cheaper than oil from elsewhere. Any country that can buy oil from Iran (such as China) will then switch to save money.

This means that the countries that are no longer selling as much to China (or other Iranian customers) will then have the capacity from their existing production freed up to meet European demand.