A couple weeks ago we critiqued a rather outlandish Fortune article that asked readers, “Ready for $262/barrel oil?” We were not ready at all, and took some comfort from the discovery that Nelson Schwartz’s piece (carried by mother ship CNNMoney.com) was not so much news as evidence of the loathsome journalistic tendency to publish stories about wholly improbable disasters.
Schwartz’s $262/barrel warning and the five other doomsday scenarios laid out in his article came directly from Bill Browder, who heads up the Moscow-based Hermitage Fund. What Schwartz did not mention is that Browder’s fund had been pouring money into the Russian energy giant Gazprom (its largest single investment). Far from being an objective source, Browder stood to benefit handily from planting fear-inspiring stories that could raise the prices of oil and Gazprom stock.
The exercise was made even more dubious by the fact that just a few weeks earlier, Schwartz had used Browder as his primary source in another article noting that expensive oil is, in fact, good for Gazprom.
You can imagine, then, how disappointed we were to see Browder as the main source in yet another CNNMoney article stoking oil fears that are utterly unwarranted. Under the headline, “Will Iran dispute push oil to $130?” Chris Isidore writes that “the growing dispute over Iran’s nuclear program is one key reason oil prices have jumped since late December back near $65 a barrel … and at least one analyst says oil could shoot to more than $130 a barrel, if Iranian oil stopped flowing altogether.”
¡Dios mio! Sounds like my parents (who drive an awe-inspiring 1989 Crown Vic) are in for a world of hurt.
Luckily, Isidore hedges his warning with a few hints that his headline and opening paragraphs are nothing more than twisted, malicious jokes. Far from being concerned about soaring oil prices, “most experts see little chance of a complete shutdown of Iranian oil due to the dispute over its nuclear program,” he writes.
One expert, a professor of economics, seems particularly unconcerned, telling Isidore that “History tells us since the Iranian revolution, they always talk about cutting production, but they’ve never cut it.” Phew!
No, wait, the joke isn’t over yet. “Still,” Isidore writes, “uncertainty about Iranian production is what is lifting oil prices today.” Clearly, oil prices are rising, possibly as a result of CNNMoney’s fear-mongering stories. But to $130 a barrel? Is this really possible?
Isidore consults another expert, an economist at financial services firm Wachovia, who tries to be a good sport, though it’s clear he had a tough time keeping a straight face. If a nuclear stand-off leads “to the shut-off of Iranian oil,” he says, “I think it would probably mean we’ve got bigger problems than the price of oil.” In other words, why are you asking me this ridiculous question?
With all other sources proving uncooperative, Isidore sets about shoving Browder’s absurdities down our throats:
The estimate for the biggest jump in oil prices if Iran turns off the taps? A doubling to more than $130 a barrel, says Bill Browder, who runs the $4 billion Moscow-based Hermitage Fund, which invests in Russian oil companies.
Browder cautions that he’s not predicting a cut-off of Iranian oil, only suggesting what his historical analysis projects is likely to happen if 5 percent of world oil supplies suddenly disappear from the market.
“You have almost no spare capacity in the market. OPEC has only about 1.7 million barrels a day (of excess capacity),” he said. “I think it’s highly unlikely they would stop supplying oil. But if the situation escalates, and Israel bombs Iran, it may not be their choice.”
Yes, it is all carefully hedged. But the clear takeaway message from the headline and the prominent place given to Browder in this story is that a conflict just short of all-out war with Iran is entirely possible, and that we should all prepare for oil prices of $130 a barrel.
Unlike CNNMoney’s last Browder favor, this one notes that its main source is a major investor in oil companies. But the disclaimer only suggests that Isidore recognized the conflict of interest, and circulated Browder’s unique and far-fetched thesis anyway.
Ain’t nothing funny about that.
Edward B. Colby was a writer at CJR Daily.