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Iran’s oil exports may disappear December 25, 2006

Posted by tkcollier in Business, Geopolitics, News, Politics.
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Report: Iran’s oil exports may disappear
Iran is suffering a staggering decline in revenue from its oil exports, and if the trend continues income could virtually disappear by 2015, according to an analysis released Monday by the National Academy of Sciences.

Iran’s economic woes could make the country unstable and vulnerable, with its oil industry crippled, Roger Stern, an economic geographer at Johns Hopkins University, said in the report and in an interview.

Iran earns about $50 billion a year in oil exports. The decline is estimated at 10 to 12 percent annually. In less than five years exports could be halved and then disappear by 2015, Stern predicted. Photo of shop in Esfahan, Iran.

“Since 1980, the energy demand in Iran has increased by 6.4% while the offering has only increased by 5.6%, and the export has remained unchanged ever since 1996,” Stern points out. He said oil production is declining and both gas and oil are being sold domestically at highly subsidized rates. At the same time, Iran is neglecting to reinvest in its oil production.

“With an explosive demand at home and poor management, the appeal of nuclear power, financed by Russia, could fill a real need for production of more electricity.”

Iran produces about 3.7 million barrels a day, about 300,000 barrels below the quota set for Iran by the oil cartel, the Organization of Petroleum Exporting Countries.

The shortfall represents a loss of about $5.5 billion a year, Stern said. In 2004, Iran’s oil profits were 65 percent of the government’s revenues.

“If we look at that shortfall, and failure to rectify leaks in their refineries, that adds up to a loss of about $10 billion to $11 billion a year,” he said. “That is a picture of an industry in collapse.”

If the United States can “hold its breath” for a few years it may find Iran a much more conciliatory country, he said. And that, Stern said, is good reason to belay any instinct to take on Iran militarily.

“What they are doing to themselves is much worse than anything we could do,” he said.

“The one thing that would unite the country right now is to bomb them,” Stern said. “Here is one problem that might solve itself.”

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