Iran has watched the drop in oil prices with growing alarm, the International Herald-Tribune reports, and it wants OPEC to take action to support prices at higher than $100 per barrel. Iran expresses its concern for consumers as prices drop, but their concern involves their own production. As the price drops, the Iranians have less money for other purposes (via Meryl Yourish):
Iran’s Oil Minister said Saturday that it would be “unsuitable” for both producers and consumers for oil to dip below US$100 a barrel.
Gholam Hossein Nozari spoke on the sidelines of an international gas conference in Tehran, and urged fellow members of the Organization of the Petroleum Exporting Countries, or OPEC, not to pump too much oil and avoid a drop in prices.
“A price of US$100 and below is not suitable for anybody, neither oil producers nor oil consumers,” he told reporters. “OPEC members need to respect their output quota to avoid a worsening of the oversupply,” Nozari said.
Nozari said oil producers were pumping around 400,000 barrels per day more oil than the market needed.
The problem is significantly more complicated than an overproduction, and cutting back on output won’t address the price enough to make it pay. The same speculators who got so much calumny heaped on their heads when prices rose to $147 a barrel are now calculating that the world will enter a tough recession over the next few months, at least. The low prices reflect their assessment that demand will continue to decrease as economies contract, as manufacturers and service providers will need less energy. A price increase under these circumstances might initially result in higher revenues for producers, but it will also likely prolong the recession. The global financial markets will need cheaper energy in order to rebound.
Oil fell below $90 per barrel today for the first time in a year. That puts a great deal of pressure on two economies in particular: Iran and Russia, not coincidentally partners on the nuclear-power project at Bushehr. Both countries fund their rogue ambitions through expensive energy supplies. Iran has to import refined gasoline, which it subsidizes for Iranians in order to keep them happy, and the enormous profits it gets from pumping crude funds that as well. Without ready access to massive profits from oil production, the Iranians can’t afford to fund terrorism, its nuclear-weapons program, and gasoline subsidies at the same time. Something will have to give, and if it’s gasoline subsidies, they may face even more political unrest than they do now.
OPEC has hinted they will wait to defend prices for the $80 per barrel level. They have two reasons to allow prices to fall to this level. It makes it somewhat less cost-efficient for the US to start massive new exploration and production efforts, which would kick out a major strut on the price of crude oil. They may also want to hobble Iran. Saudi Arabia in particular has major concerns over Iran’s nuclear-weapons pursuits, and the best way to contain them is to strip them from their cash. Certainly, no other strategy has proven worthwhile. This could be a major front on an economic war against the mullahs of Iran, at least coincidental if not deliberate.
Iran can continue to cry, and they can share a Kleenex with their Russian partners.
Join the conversation as a VIP Member