Wednesday, January 26, 2011

Decline in Oil Prices

Oil prices fell today, trading below $87 a barrel, after the Saudi Oil Minister said the crude supplies should increase by at least 8 million barrels a day to meet increased demands. Oil prices had recently been on a steep rise, hitting $95 mark last week, and many producers were looking at $100 oil.

For Iran in particular the sustained high oil prices are key to the success of its subsidy reforms, including its $2.4 billion monthly cash handouts to the people to cope with the rising prices after the removal of government subsidies.


Anonymous said...

Iran has done wonders in sustainable transportation development despite all obstacles. A lot of the projects were started under Mahmoud Ahmadinejad when he was the Mayor using his Ph.D in Transportation Engineering skills and expertise. This is a well deserved recognition by international planners. Iran is also doing well in other areas of environmental management including preservation of natural habitat. Iran Payandebad.

Anonymous said...

Your post is incoherent rhetoric. Iran had a much higher subsidy burden when oil was $15/barrel. Further, the subsidies do not require foreign currency and so have very little to do with oil prices.

Nader Uskowi said...

Anon 4:37 AM,

Of course Iran would benefit from higher oil prices to finance its $2.4 billion monthly payouts which are, and I believe rightly so, an integral part of the government's subsidy reforms. To pay for this, the government needed to have an extra income, hence the importance of high oil prices. How else could it finance it?

I couldn't quite follow your reference to $15 oil. The government is saying that the direct and indirect costs of subsidies have risen to $100 billion a year at the present time. Are you saying that when oil was at $15, the subsidy costs were even higher than $100 billion? Doesn't seem correct. Appreciate if you elaborate.

Anonymous said...

You suffer from the idea that all of Iran's economy and government revenue is tied to the money it gets from oil exports.

Nader Uskowi said...

The revenues aside, are you saying that during the $15 oil period the cost of subsidies were higher than $100 billion, the current cost estimated by the government?