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Kuros
Joined: 27 Apr 2004
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 Posted: Fri Oct 24, 2008 3:32 pm Post subject: Iran & Venezuela: Bad Times Ahead? |
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Alternate title: when bad things happen to bad regimes.
Oil falls $4/barrel on Friday
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As the lowest cost producer, Saudi Arabia can afford to let prices fall for a while without hurting its budget. Most analysts estimate the Saudis could live with oil between $55 and $65 a barrel. Other producers are not so fortunate. Nigeria's oil minister said his country would be more comfortable with $80, Qatar has set a range of $70 to $90, and Iran's representative has said that anything below $90 a barrel would hurt some producers.
Some analysts believe that Venezuela's president, Hugo Ch�vez, needs $100 a barrel to pay for his expensive social programs.
In fact, the traditional "price hawks" -- Iran, Venezuela, and Libya -- are in a state of near panic at the drop in price, which few experts had anticipated even a few months ago.
Domestically, Iran's president, Mahmoud Ahmadinejad, who was elected on a populist platform to share the country's oil wealth, faces a tough economy that could jeopardize his re-election next year.
Iran's oil minister, Gholam Hossein Nozari, set the bar high when he arrived in Vienna on Thursday, calling for OPEC to slash its production by 2 million barrels a day, more than 6 percent of the group's output. His call was echoed by Rafael Ram�rez, the Venezuelan energy minister, who said the group should make a "substantial" cut, while the representative from Libya called for a "huge" reduction in the cartel's output.
At the same time, some analysts warn that the current decline in prices could set the stage for a new energy shock when the economy and demand eventually pick up.
Energy executives have said that as prices fall, some projects will be delayed, and oil companies will most likely curtail investments. This will probably slow the growth in oil supplies, which had already been sluggish in recent years. |
2nd-hand source
The Saudis are letting their rivals feel the pain. |
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Fri Oct 24, 2008 3:58 pm Post subject: |
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| Putin is probably spitting nails over this, too. |
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JMO
Joined: 18 Jul 2006
Location: Daegu
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| Posted: Fri Oct 24, 2008 6:42 pm Post subject: |
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| I don't really understand this. Even though SA can live with cheaper oil, why wouldn't they want the full $100 a barrel? |
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Ilsanman
Joined: 15 Aug 2003
Location: Bucheon, Korea
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| Posted: Fri Oct 24, 2008 7:17 pm Post subject: |
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| It couldn't happen to a nicer bunch of people. |
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Beej
Joined: 05 Mar 2005
Location: Eungam Loop
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| Posted: Fri Oct 24, 2008 7:19 pm Post subject: |
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| JMO wrote: |
| I don't really understand this. Even though SA can live with cheaper oil, why wouldn't they want the full $100 a barrel? |
For oil producing countries its a fine line between maximizing profits and crushing demand. When oil is expensive people drive less, downsize to smaller cars, and governments start to think about funding alternative energy. These can have a long term affect on the demand for oil. This happened during the 70's oil shocks. When oil is all you got, you need to find a nice balance. |
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JMO
Joined: 18 Jul 2006
Location: Daegu
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| Posted: Fri Oct 24, 2008 7:23 pm Post subject: |
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| Beej wrote: |
| JMO wrote: |
| I don't really understand this. Even though SA can live with cheaper oil, why wouldn't they want the full $100 a barrel? |
For oil producing countries its a fine line between maximizing profits and crushing demand. When oil is expensive people drive less, downsize to smaller cars, and governments start to think about funding alternative energy. These can have a long term affect on the demand for oil. This happened during the 70's oil shocks. When oil is all you got, you need to find a nice balance. |
Ah, understood. Is there a certain ideal price or ideal price range? |
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NAVFC
Joined: 10 May 2006
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| Posted: Sat Oct 25, 2008 12:11 am Post subject: |
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This alarmist crap over Iran is getting real dumb. People keep talking about it as if we were going to invade Iran...
even suggesting wed invade veneuzela is laughable... theres nothing making such a venture worth it, or if your going to judge based on the fact that chavez doesnt like us and has Oil, well that matahces the description of most of the ME and yet Iraq is the only one weve invaded
as far as Iran, no one has been discussing an invasion.
Someone, more likely Israel then the US, will strike Irans nuke facilities. Of that im Certain. If there is military action against Iran, itll be much like what hapened in Clintons time, operation Desert Foxc against suspected Iraqi WMD facilities. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Sat Oct 25, 2008 7:12 am Post subject: |
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| NAVFC wrote: |
This alarmist crap over Iran is getting real dumb. People keep talking about it as if we were going to invade Iran...
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Except of course, on this thread. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Sat Oct 25, 2008 10:16 am Post subject: |
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| JMO wrote: |
| Beej wrote: |
| JMO wrote: |
| I don't really understand this. Even though SA can live with cheaper oil, why wouldn't they want the full $100 a barrel? |
For oil producing countries its a fine line between maximizing profits and crushing demand. When oil is expensive people drive less, downsize to smaller cars, and governments start to think about funding alternative energy. These can have a long term affect on the demand for oil. This happened during the 70's oil shocks. When oil is all you got, you need to find a nice balance. |
Ah, understood. Is there a certain ideal price or ideal price range? |
Beej is right on the money.
I would say the ideal price range would allow for a reasonable margin of profit after expenses: a nice, substantial but not exorbitant net profit. Which is probably not so helpful an answer.
Right now Venezuela and Iran have been behind on infrastructure for sometime. Oil fields require substantial initial investments, but potentially provide strong returns for the first few decades, and then diminishing returns. As an oil-producing nation, you want to tap new oil fields before your established fields hit peak oil production.
Venezuela and Iran are democracies (in the most expansive sense of the concept), but there are mechanisms for popular support and subsequent backlash in each country. As a result, elected officials promise windfall profits to the people, just like the Governor of Alaska. So, these entitlements add to the profit margin.
Like any democracy, the system is inherently fiscally irresponsible. Politicians promise the unsustainable during conditions of prosperity.
Meanwhile, the Saudis take a much more long-term view. They do everything possible to keep oil affordable. "The Stone Age did not end for lack of Stone." They know that US & European domestic wind, nuclear, and solar stockpiles are better long-term investments if the price of oil becomes too high for too long. They're conservative technocrats, while Chavez and Ahmanijehad are populists.
Potentially, the Saudis have their competitors on the ropes. If they can just get the price of fuel low enough, the Saudis will make it impossible for Iran & Venezuela to invest back into infrastructure. |
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