Energy Experts Confused Over Oil Prices

07/10/2008 05:12 am ET | Updated May 25, 2011

MADRID, Spain — With Middle East tensions building, Iran's oil minister warned Wednesday that an attack on his country would provoke an unimaginably fierce response.

Minister Gholam Hossein Nozari said, however, that Tehran would not cut oil deliveries and would continue supplying the market even if struck by Israel or the United States.

Tehran "is not going to be quiet," if attacked, Nozari told reporters. It's "going to react fiercely, and nobody can imagine what would be the reaction of Iran," he added.

Over the weekend, the commander of Iran's Revolutionary Guards warned that Tehran would respond to an attack by barraging Israel with missiles and could seize control of a key oil passageway in the Persian Gulf, the Strait of Hormuz.

But a senior U.S. military commander said Wednesday that Washington would not allow that to happen.

Vice Adm. Kevin Cosgriff, commander of the 5th Fleet spoke to reporters after talks with naval commanders of Gulf countries in the United Arab Emirates capital of Abu Dhabi. The one-day meeting was to focus on the security of the region's maritime and trade routes and the threat of terrorism.

The 5th Fleet is based in Bahrain, across the Gulf from Iran. Cosgriff said that if Iran choked off the Strait of Hormuz, it would be "saying to the world that 40 percent of oil is now held hostage by a single country."

"We will not allow Iran to close it," he told reporters.

Minister Nozari addressed rising tensions outside the 19th World Petroleum Congress after a presentation on Iran's oil and gas industry to a packed audience, including representatives of European and U.S. energy companies.

Tehran is under U.N., U.S. and European sanctions because it has defied U.N. Security Council demands to suspend its uranium enrichment program. But with oil supplies tight and prices at unprecedented levels, the energy industry remains tempted by the possibilities of investing in Iran, OPEC's second largest oil producer and No. 2 in terms of the world's natural gas reserves.

President Bush has repeatedly said that a military strike on Tehran is possible as a last-resort if Iran continues to pursues uranium enrichment and fails to heed other Security Council demands.

Last month, Israel sent warplanes on a major exercise in the eastern Mediterranean that U.S. officials said was a message to Iran _ a show of force as well as practice in the operations needed for a long-range strike mission.

ABC News quoted an unnamed senior Pentagon official warning of an "increasing likelihood" that Israel will strike Iran's nuclear facilities before the end of the year.

Nozari said such any attack would send oil prices further into uncharted territory.

"We don't think the wise people in the world even think about any action like that," he said. "Can you imagine ... what would be the result in the oil market?"

Oil prices hit a record high above $143 this week.

But Nozari indicated Iran would not withhold its crude from the market even if attacked.

"Iran has always been a reliable source of supply to the market, and Iran remains a (reliable) source of supply," he said.

He dismissed suggestions that the standoff over Iran's nuclear program has diminished Iran's oil and gas exports, despite U.S. sanctions that prohibit American companies from doing business with Tehran and growing pressure from Washington on other countries to follow suit.

"We have increased our production in the past two years by 250,000 barrels a day and we have added to the production of our gas," he told the AP.

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