Posts by PeymanJonoubi:
Saudis’ Double-Standards for Iran Oil Freeze & Fantasy of Increase in Oil Production
May 5th, 2016
By Peyman Jonoubi.
Having found that its plan to freeze Iranian oil is not effective, Saudi Arabia directed Doha talks to failure. 18 oil producing states get together in Doha, Qatar, on April 17 to stabilize oil production at the level of January until October 2016 but the meeting failed.
The main reason for failure of the Doha meeting was lack of access of Saudi Arabia and its allies to the main goal, let’s say Iranian oil freeze. In fact, Saudi Arabia tried to bring Iran to a point where it had no option but accepting the status quo, thus using oil freeze as a lever to continue economic pressures on the country. Iran did not take part in the meeting so that those being responsible for today condition of the oil market will be freer to solve their behind-the-curtain problems.
On the topic, Minister of Petroleum Bijan Zanganeh said certain oil producers had since the beginning opposed lifting of Iran sanctions and they tried to lower the oil price just to pile up much pressure on Tehran. He says, “Now, there are more than two million barrels of oversupply in the market, which have caused plunger in oil prices.”
The Minister said countries imagined that through raising controversy among oil producers after lifting of Iran sanctions, they could divert public opinion from the issue that they themselves were factor of instability. He said Iran has had no role in the oil market instability.
Zanganeh believed that acceptance of the oil freeze project by Iran meant that our country will in fact bow voluntarily to the sanctions which were lifted practically after years of efforts and resistance of the nation. Zangeneh’s comments are fully logical regarding the record of Saudi Arabia.
Earlier in December 2011, when the 10th government was in office, the OPEC held an important meeting and in the conference Saudi Arabia presented a pre-meditated plan in a dastardly way to receive the permission to substitute its oil in markets for Iranian oil!
Since then, Iran accepted Saudi Arabia’s cunning plan, allowing compensation for production of any of the OPEC members through increase in production of other members to the ceiling of 30 million barrels per day. Having informed of severance of sanctions on Iran and entry of other G5+1 members to the new phase of oil sale sanctions in 2012, Saudi Arabia and certain other allies decided to divide Iran’s market quota among themselves.
They did know that since July 1, 2012, 27 EU members will suspend crude oil imports from Iran for further notice and hence, they should decide OPEC rationing and Iran share in the market six months prior to the time sanctions on Iran oil goes into effect.
After finalization of Iran-G5+1 agreement, which led to lifting of economic sanctions and annulment of the UN Security Council resolutions against Iran, the country managed to raise its oil exports to two million bpd from one million bpd in less than six months.
Following executive measures for implementation of the Joint Comprehensive Plan of Action (JCPOA) and return of Iranian oil to the global markets, senior delegations from many countries and the European, Asian and American industrial companies travelled to Iran to give an impetus to their economic and political ties with Iran.
Indians travelled to Iran to talk about the project for implementation of the gas pipeline project for export of the energy to their country. Pakistan will expedite its activities to start laying pipeline for Iran’s gas exports to Pakistan. The UAE is seriously in efforts to complete operations for export of Iran gas to the country. Turkey has started talks for increasing gas exports to the country. Europeans also want to import gas from Iran and invest in the petrochemical and other industrial projects.
In the meantime, Saudi Arabia is unbelievably witnessing regional developments and observes Iran’s moves of recourse to the international community and raising economic potential of the country.
Saudi Arabia and its supporters, who had in the past three decades tried to restrict Iran and downsize its economic power are today puzzled. They tried to meet the goal through helping Baathist regime and Daesh to create a critical region west of Iran, assisting Taliban to make Iranian eastern borders insecure, planning to escalate tension on Iranian northern borders and preventing improvement of relations with the Persian Gulf littoral states and planning for severance of sanctions on European Union and the US.
Adhering to the agreements reached in the JCPOA and contrary to expectations of Saudi Arabia and its supporters, Iran has been able to encourage such big international companies as Shell, Total, BP, Eni, Repsol, Statoil, Lukoil, Gazprom, Hinduja, Linde, BASF, Peugeot, Siemens, Boeing, Airbus, ARCA Insurance Service and so on to come to Iran from four corners of the world to expand investment in various industrial fields in Iran through help of foreign banks.
Iran has been able to amazingly raise its production and launch proper marketing for its oil, regaining part of its occupied markets, seeking further increase of its production and exports.
Iran has been able to show that as a key element, it can help growing stability in the region and there is no possibility for its omission from regional equations.
Definitely, should the status quo designed by government continue, Iran’s political and economic prospect will be clear and the more we step forward Saudi Arabia and its supporters will face more limits to win international support to continue economic and political blockade of the country.
So, Saudi Arabia will have to act more transparently!
For the first time in 2011 and six months prior to imposition of the oil embargo on Iran, Saudi Arabia and its supporters changed OPEC members’ quota based on the share each member had.
Second time in September 2014 and one year before elimination of oil embargo on Iran, they started the project of reducing oil price. But Iran managed to overcome the barrier too.
For the third time and after elimination of international sanctions on Iran, Saudi Arabia raised the issue of oil freeze and mandating Iran to contribute to the project so that it will be implemented.
Both the oil market and the world oil and economic experts do know that though non-durable production capacity of Saudi is 12 million barrels per day, the country’s output capacity will not allow it to go on with lasting production of more than 10.5 bpd in a period of more than three to six months.
Regarding low prices of oil and inability for investment and oil production surplus, other oil producers are not only incapable of preserving current production, but also talks on increase in the production by the countries seems more to be a joke.
Principally, due to the same reason, Saudi Arabia proposed production of oil from al-Khafaji oil field common with Kuwait and prices have also started going upward.
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Ban-Free Iran Smashes Regional Equations
March 20th, 2016By Peyman Jonoubi.
TEHRAN, March 20 (Shana) — Ever since the victory of the Iranian Revolution in 1979, Tehran’s regional rivals, which happen to be seeking to dominate the global oil market, never relented to tense up their siege of Iran by targeting Iran’s export routs and energy links with the world; but the nuclear deal smashed all regional equations.
A review of Iran’s map and its massive potentialities in energy, industry, transportation and tourism sectors and its situation in the crossroads of Persian Gulf littoral states, eastern and western Asian countries and newly independent states and the region’s geopolitical developments after the Islamic Revolution is telling that major geopolitical changes are under way in the region.
In the 37 years since the Revolution, the enemies have sought to curb Tehran’s geopolitical and geo-economic might as much as they could, and the blockade of Iran by its enemies which hold fast to global oil market domination, kept tightening and aimed at Iran’s export routs and energy links with the world.
From the east, the Peace Pipeline, which was supposed to send Iran’s natural gas to Pakistan and then to India came to a standstill under the pretext of international sanctions on Tehran’s nuclear program; Islamabad signed a key deal with Qatar for the import of liquefied natural gas (LNG) immediately after the removal of sanctions on Tehran; from the west, ISIL began to emerge in Iraq and a proxy war formed in Syria under the excuse of bringing down Bashar Assad, which have blocked Iran’s gas pipeline routes to Europe; in south, repeated disruptions are reported in Iran’s gas exports to United Arab Emirates which favor Abu Dhabi and Qatar which stepped into the Turkish gas market immediately after Iran’s nuclear deal.
The same goes for Iran’s crude oil export which is targeted by mischief of the House of Saud and its allies. They overtook 1.5mbd of Iran’s oil market share after the sanctions intensified in 2011 and are now seeking to sell oil to Iran’s traditional customers even for free to keep them satisfied. However, Tehran has been seeking to restructure its export plans given the new circumstances.
Since implementation of the Joint Comprehensive Plan of Action (JCPOA) and lifting of sanctions on Tehran’s oil exports, Iranian Ministry of Petroleum is crowded by foreign delegations who make the trek to Tehran to hunt out cooperation opportunities heralding a promising future for the country’s economy especially in the oil and gas sector.
Despite allegations of most analysts, Iran has been able to bring its exports to 2mbd in less than 6 months after JCPOA’s implementation which is a record by itself.
By doing so, the country has not only baffled many analysts who denied its ability to double its exports in such a short period of time, it has also become a key player in the oil market.
The 2mbd glut in the oil market will not worsen by the Q3 of 2016 if Iran adds 1.5mbd to its exports and other producers keep their exports at the current levels and demand grows as it should. As a result, the prices will not change a lot by then.
Likewise, a number of OPEC and non-OPEC producers have unofficially agreed to freeze their export growth in a bid to curb further oil price slump.
Meanwhile, oil price slump has led to reduced investments in shale oil and gas projects and reduction of their production which is another reason that makes stabilization of prices at the current prices a mandatory choice for conventional producers.
Unlike other producers, Iran could tap fields it had to stop production from because of the sanctions, and add to its production and exports
Besides, Iran enjoys a 1% share in the global gas export market and given the fact that its holds 18.2% of global gas reserves, the country’s share in gas exports will jump to at least 10% by 2025.
Despite relentless resistance of Saudi Arabia and its allies, the pressure of international sanctions is reducing on Iran; high-profile business delegations from around the globe are heading to Tehran to win a share in Iran’s market.
The visits are while economy is not in its favorable state in most other oil-producing countries that are eager to lure foreign investors to fund their oil and gas projects to raise their output to alleviate some of the pain caused by falling oil prices; their foreign exchange reserves are estimated to last no more than one or two years. Such producers are used to high-priced oil and have lived such luxurious lives that will bring them crises in the near future if they cannot cope with new oil prices.
Iran, however, remains the only place that, given its massive economic potentialities, can ensure return on foreign capital that would otherwise lose its value over time. However, investors are still juggling opportunities in the country and are sizing up the risks; the newly-unveiled oil contract mode, Iran Petroleum Contract (IPC) could a good answer for skeptics, however.
The large number of incoming delegations to Tehran from around the world is telling enough for the notion that believing that “a ban-free Iran has smashed equations of its regional rivals”.
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Why Remove Fuel Subsidies?
June 12th, 2015
By Peyman Jonoubi.
TEHRAN –The price of gasoline and gasoil has been a big challenge for oil exporting counties including Iran and at the same time good commodities for oil importing countries to collect revenues by levying taxes on the one hand and advancement of social security programs on the other. International Monetary Fund (IMF) has estimated that the total energy subsidies in the world will be at 5.3 trillion dollars in 2015, an equivalent of 6.5 percent of gross domestic product (GDP) of all countries around the world.
IMP has also said that allocating subsidies to energy consumption has caused health problems as well as pollution. As World Health Organization (WHO) has said, this huge amount of energy subsidy probably goes beyond the costs paid worldwide for health and treatment (6 percent of GDP) in 2013.=In Iran, the parliament passed a law in 2010 to reform and remove subsidies step by step. Under the law, the government has to raise the price of energy carriers and allocate the resulting resources to welfare, social security and economic development.
It’s noteworthy to remember that low level of productivity in Iran and not caring about energy consumption standards are among the main reasons behind energy intensity in the country. Sharp fall in the value of the national currency which occurred during the closing years of the previous administration was the other reason that widened the gap between energy prices in Iran and other countries.
The commercial price of gasoline and gasoil is more and less the same all over the world but the prices being paid by final consumers in each country reflects to a great extent the policy of individual countries at national levels.
In some countries including in European countries, high taxes are being levied on fuel while in some countries like Iran, Venezuela and Saudi Arabia the governments pay high subsidies for fuel consumption.
Pricing gasoline and gasoil in each country and region depends on various factors including the price of crude oil in world markets, processing and distribution expenses, domestic demand, national currency value, taxes and availability of fuel. In developed countries, people pay the highest rates for gasoline and gasoil and this means higher revenues through imposing taxes on fuel.
For example in 2012 the price of crude oil, refining, taxes and distribution, and marketing have made up respectively 62 percent, 12 percent, 12 percent and 14 percent of the final price of each gallon of gasoline in the U.S.
Meanwhile, taxes have made up 72 percent of the price of a liter of gasoline in Turkey, 62 percent in Germany, 57 percent in Italy, 60 percent in Japan, 25 percent in Canada and 12 percent in the U.S.
In India, taxes make up half of the selling price of gasoline at gas stations. Indians pay about 50 percent of the price of gasoline as tax revenues which include taxes collected by central government (24 to 26 percent) as well as different states of the country.
While some countries levy taxes on fuel as a source of meeting budget income, some other countries pay subsidy to their citizens for consuming gasoline and other oil products.
Paying fuel subsidies, mainly in oil exporting countries, brings down transport costs and subsequently the price of goods but at the same time lowers fuel consumption productivity, encourages fuel smuggling and increases energy intensity.
Low level of fuel prices in Iran and paying energy subsidies not only cost the government 480 trillion rials a year but inflicts irreversible environmental damages while intensifying fuel smuggling.
The gap between gasoline and gasoil prices in Iran and its neighbouring countries is one of the main reasons behind fuel smuggling to countries like Iraq and Afghanistan that creates increasing difficulties for the government.
Now let’s have a look at fuel prices in Iran and other countries which in itself make many things clear.
While each liter of gasoline and gasoil in Iran, after raising fuel prices on 25th May 2015, stands at 30 cents and 18 cents respectively, they are traded at 63 cents and 62 cents respectively in Iraq which means smuggling fuel to the neighbouring country is very profitable and smugglers could earn 33 and 44 cents in exchange for smuggling each liter of fuel with huge monthly incomes.
The same is true when consumers pay 1.81 dollars for each liter of gasoline and 1.54 dollars for gasoil in Turkey which implies smugglers earn 1.51 dollars and 1.36 dollars in exchange for smuggling just one liter of the mentioned fuels to Turkey.
Comparing the price of fuel in Iran and Pakistan depicts similar realities related to profitability of smuggling fuel from Iran to the neighbouring country.
Despite existence of laws that impose penalties on smuggling, a very wide gap between fuel prices in Iran and its neighbouring countries tempts fuel smugglers to take the risk to go ahead with their smuggling plans.
Given these facts, it seems adjusting fuel prices and raising it to the levels being traded internationally is the best solution to curb fuel smuggling.
Otherwise the wide gap between prices creates enough incentives for undertaking smuggling and will kill the incentives for job creation especially in border areas and at the same time will facilitate flow of money arising from illegal trade of fuel to the pockets of profiteers instead of going to the treasury.
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World oil market and OPEC chanllenges
May 28th, 2015By Peyman Naoubi.
Oil prices
Demand
Supply
OPEC Supply
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