Analysts believe tensions with Iran over its nuclear energy program and the sanctions imposed against the country are the main reasons for the spike in oil prices in recent months.
On January 23, under US pressure, EU foreign ministers approved new sanctions against Tehran to prevent the union’s member states from buying Iranian crude or doing business with the Central Bank of Iran (CBI) and to freeze Iranian assets across the union.
The sanctions, which went into effect on July 1, are the result of claims by Washington and some of its Western allies that Iran's nuclear energy program contains a military component.
Iran has strongly refuted the US-led allegations that Tehran may be pursuing a military approach in its nuclear energy program, arguing that as a signatory to the nuclear Non-Proliferation Treaty (NPT) and a member of the International Atomic Energy Agency (IAEA), it has every right to develop and acquire nuclear technology for peaceful purposes.
Iran has warned the new round of sanctions will affect the crisis-hit economies of European countries and the US most.
Press TV has conducted an interview with Ravi Batra, professor at Southern Methodist University, to hear his opinion on this issue.
The following is a rough transcription of the interview.
How would you see the oil market developing as of July first when these sanctions took effect against Iran?
Well I am not surprised that oil prices went up. There are two reasons for it. One is the tension between Iran and the Western world and the other is that the euro crisis seem to have been postponed somewhat and the world thinks that the euro crisis will fall so there will be increase in oil demand.
So these are the two reasons why the oil prices have made a combat and it is possible that they will keep rising, grow up to a hundred dollars, it is still possible that the climax the crude oil could go up to hundred dollars.
And how would this have a backlash on the countries who have taken part in these sanctions against Iran?
I do not know if there is going to be a backlash or not but the economic effect will be certainly bad. The whole world is slowing down in terms of economic growth. China is slowing down, eurozone is in recession already and the United States is also beginning to slow down.
But there will be a slowdown of growth and there will be some bad economic effect but other than that I do not know what else would happen in these countries.
And how long can these sanctions hold out?
The sanctions can go on for a long time especially because Libyan oil is now coming back on the market and Iraq is also increasing production.
So these sanctions could go on for a while unless the price of oil jumps beyond hundred dollars but until then there won’t be much happening.
So I think sanctions could go on for two three months at least.
But many say that the oil that Iran produces, Iranian crude is hard to replace?
Well there is no doubt Iranian crude is very hard to replace but the countries that imposed these sanctions they have taken all that into account and they are prepared to suffer some economic damage even though the sanctions can hurt them.
So that is the whole thing. When there is a fight between two nations then you have other type of sentiment dominating the dialogue. Then the economic effect is not malignant much as the personal honor and so on.