I heard a news story on NPR today saying that if sanctions are successfully lifted on Iran, in 6 months they intend to ship as much oil as they can to generate revenue for the country (read government). Since Iran is not a part of OPEC I don’t see how OPEC, or anyone else, can stop them for doing that.
Does Iran possess enough oil reserves to create even a temporary oversupply in the market?
Can’t OPEC just cut back their output to keep world supplies at a certain level? They wouldn’t be making as much money, but they could at least prevent a glut on the market causing a drop in oil prices.
Should I plan on $2.00 per gallon gas in the US next summer and why not? Expand.
Probably not, Iran was exported 2.5 million bpd before sanctions and 1 million after. Surveys indicate their output is currently 2.65 million bpd. They claim to be able to produce 4 million bpd. But if they could do that, why weren’t they before? They probably could do a little more, but the extra 1.5 million bpd or so won’t affect prices that much. Iraq is trying to produce more than its quota, Libya is trying to get its production back and the US is producing a whole lot now. Unless Iran is telling the truth, the end of sanctions will lower the price some but not be a huge deal.
Saudi Arabia is the only OPEC nation with significant spare capacity. Given the political situation they have likely stepped up production to make up for the Iranian sanctions. No one knows if they really have as much spare capacity as they claim, and if they are really willing to cutback drastically.
Prices are expected to go down next year, anyone who knows more than that is using that knowledge to make huge amounts of money and not posting to internet boards.
Regarding #1, they certainly have the reserves, but whether they have the ability to actually ramp up production out of them is the more important question. Iran’s largely DIY nationalized oil industry probably can’t increase capacity much without foreign investment and expertise. Lifting the sanctions may help with that, but there are larger systemic problems with the country’s oil industry that will probably need to be addressed as well.
That’s the issue. One of the articles a year or two ago suggested the industry had suffered a lot from the sanctions. they did not have the expertise nor the new equipment to get more oil out of old oil fields.
Depending on how fast they want to bump up production - they need to buy updated equipment on the world market.
One other comment was that the reduced production was what was driving the need for nuclear power. Nuclear weapons may be a prestige and military booster, but the other important reason for nuclear research was electricity generation. Their reduced production threatened to make them a net importer of energy if they did not do something to improve their infrastructure.
Certainly, though, the need for more investment money would be an incentive to ramp up production to much higher levels. The problem is that apparently fracking tech has increased supply and depressed prices already, so they will only add to that problem.
The Saudis like to use their “slack” to reduce or increase production to help keep prices reasonable (not too high, not too low). however, in the face of a glut, and with their own budget issues, there’s a limit to how much the Saudis can reduce production.