Daniel Drezner has a pertinent question. Following the US National Intelligence Estimate that Iran’s nuclear program has been frozen since 2003, you’d expect oil prices to have fallen. But in fact they rose yesterday. Now why should this be, he asks? He reckons that it could mean one of four things is true:
1) Oil traders are slower at working through geopolitical ramifications than your humble blogger;
2) Oil traders are so smart that they already knew Iran’s nuclear weapons program had been frozen, and had therefore already priced in expectations that the U.S. would eventually discover this fact.
3) Political factors are not as important in influencing oil prices as some commentators believe.
4) The NIE will have zero effect on the expected probability of the Bush administration’s decision to use force.
I’m 99.99% sure the answer is not #1 or #2, and I’m 90% sure the answer isn’t #4. But #3 seems inadequate to me.
