As I’ve written several times over the past several months, both here in Survival of the Fittest and in the Inflation Survival Letter, inflationary spikes are quite often commodity driven, particularly when supplies of crude oil are somehow disrupted. But what happens when more crude becomes available?

If you’ve been following the news over the past several weeks, you’ve no doubt read about the deal that Iran and the world’s six major world powers have struck which limits Tehran’s nuclear power program in exchange for some relief from the crippling sanctions that have been imposed on the country for years now. In particular, some of Iran’s oil shipments will now be eligible for insurance coverage from companies based in the United Kingdom.

The oceanic shipping of crude oil is a high-risk business and most shipping companies are hesitant to transport the commodity without adequate insurance. As part of the sanctions against Iran, Western energy companies have been barred from investing in the country and have barred European reinsurers from providing coverage for loss of or accidents involving Iranian oil.

Largely as a result of those sanctions, Iran’s oil exports have fallen from a high of about 2.6 million barrels per day (bpd) in 2005 to around 715,000 bpd last month, largely due to the difficulty in securing insurance. It is believed that by loosening restrictive insurance covenants, Iran could see a boost of between 200,000 – 400,000 bpd is exports, meaning that it will likely hit the 1 million bpd export cap that is still in place.

But what impact will that have on energy prices and inflation? Odds are, not much.

For one thing, the International Energy Agency estimates that about 89 million barrels of oil and liquid fuels are consumed around the world each day. Considering that volume of consumption, the availability of a few hundred thousand more barrels of oil each day won’t make much of dent in the available supply. That’s why, despite the fact that while oil prices fell by nearly 3 percent on the day after the deal was announced, oil prices today are essentially unchanged compared to the day before the deal was announced.

The only way for Iran to resume its role as a major player in the global oil market would be for all sanctions to be totally removed. Even then, though, it would still take at least two years for the country to once again reach full production potential.

Largely thanks to the constrained oil sales brought about by the sanctions, Iran hasn’t been adequately investing in its oil infrastructure. As a result, experts believe that due to a lack of modern technology it’s not feasible for the country to soon produce even as much as 3 million bpd. So, even if all sanctions were to end tomorrow, it’s unlikely that oil prices would dip below $100/bbl based solely on the availability of Iranian oil.

At the same time, automotive sales will grow, driving demand for gasoline. In the mature markets, sales of just light vehicles have risen from 64.1 million units in 2005 to an estimated 83.5 million units this year, according LMC Automotive. But over that same period, the developed markets share of auto sales has fallen from 68 percent to just 45 percent. Largely thanks to that sales shift, it’s estimated that light vehicle sales could reach 1 billion per year by the end of the decade.

That’s driving huge surges in gasoline demand, despite the fact that hybrid vehicles are becoming increasingly popular. Forty percent more hybrid vehicles were sold around the world in 2012 compared to 2011. But with the average hybrid still priced at about $30,000, they remain out of reach for most emerging market consumers and still account for just 3 percent of vehicles on the road around the world.

While alternative fuels such as ethanol and liquefied natural gas (LNG) have been making inroads into the fuel market in recent years, they still displace relatively little gasoline demand, particularly in large automotive markets such as China. China consumed only about 38,000 barrels of ethanol per day in 2011, the latest year for which figures are available, and fleet vehicles are still largely the only ones being fueled by LNG.

Consequently, while an Iranian détente would be welcomed in geopolitical terms, helping to at least ease some of the simmering tensions in the Middle East, in terms of oil prices and inflation a thawing of relations will have little long-term impact.

Portfolio Update

Despite the fact that Pall Corp (NYSE: PLL) reported a sharp decline in first quarter net income yesterday, shares are up by nearly 5 percent, as the company still managed to beat analyst estimates by a penny.

Revenue for the fiscal first quarter rose slightly from $627.6 million in the same period last year to $629.8 million. But largely thanks to restructuring charges ($9.2 million) and slightly higher interest expenses ($6 million), net income fell from $339.5 million in the same period last year to $71.5 million, or 63 cents per share.

Revenue from the company’s industrial division dropped 3 percent year over year to $311 million, as process technology sales fell by 15 percent. That was partially offset by a 5 percent increase in aerospace sales and a 9 percent increase in microelectronics.

As usual, though, the life sciences division continued to post strong growth with sales up 7 percent year-over-year, largely thanks to strong increases in medical and food and beverage sales.

Gross margin compressed by 40 basis to 51.7 percent of sales, while operating margin fell from 31.2 percent to 30.9 percent, because of higher research and development spending.

Cash flow improved substantially, though, with net cash from operating activities shooting up by 120.5 percent year-over-year to $85.9 million in the quarter.

Excluding items, earnings per share (EPS) came in at 70 cents, topping analyst expectations for EPS of 69 cents.

Despite the somewhat mixed results, management stood by its fiscal 2014 guidance forecasting pro forma earnings growth of between 9 percent – 15 percent, with revenue growing in the low to mid-single digits. So far, analysts haven’t altered their outlooks either, holding at full-year EPS of $3.40 on revenue growth of just more than 3 percent.