Iran inevitable reliance on oil revenues in short-term

The price of oil has dropped 50 percent compared to the first half of the past year. The fall in the oil price has even been more in OPEC’s basket, which plunged by 60 percent, mostly because the 12 members of OPEC are producing 1.3 million barrels of oil per day more than the global demand and giving increasingly discounts to their customers.

The Iranian administration and the parliament have different viewpoints about the oil price in the next year’s budget. The administration believes that the oil price will rise in the next Iranian calendar year, starting on March 21, and has set the oil price at $72 per barrel, while many members of the parliament have emphasized that the oil price should be set at $40.

On Wednesday, OPEC oil was sold at less than $44 per barrel. Last week, the figure was about $41. Iran is planning to export one million barrels of oil per day and 300,000 barrels of gas condensates in the next fiscal year. The next year’s budget reliance on oil income is 31.5 percent.

The Central Bank of Iran released earlier a report which indicate Iran’s oil income approximately hit $19.4 billion through selling oil at $105 per barrel during spring and summer.

David Cohen, the US Treasury Department’s undersecretary for terrorism and financial intelligence, has said he expects Iran to lose an additional $11 billion in revenue until July 2015.

However, Iran is still highly dependent on oil income even at $50 oil per barrel. Iran exported $48 billion of goods in the first half of the current year, of which $33.6 billion was related to exports of oil, gas condensates, liquefied petroleum gas, natural gas, and oil products.

During the same period, Iran exported $6.7 billion of petrochemicals. In other words, the share of non-oil and non-gas exports of the country’s total exports is very small. Of course, Iran has managed to decrease liquid fuel consumption thanks to increasing gas production by 100 million cubic meters per day during 2014. The country likely exported some $4 billion (6.5 billion liters) of gas oil and fuel oil during spring-summer.

Iran’s petrochemical exports also rose by 20 percent to above $9 billion in the first 9 months of the current Iranian calendar year (March 21-Dec. 21, 2014), but the global prices of petrochemical products fell by 18 percent in December 2014 compared to the previous month.

However, boosting gas production will not be generating income for Iran over the next five years, because no new pipeline has been constructed in the country.

The rise in gas production has not helped Iran so far dealing with the gas shortage problem. Iran has a capacity to produce 60 million metric tons of petrochemical products, but its output is 40 million metric tons. Gas shortage is one of the reasons. Gas is the main feedstock for petrochemical units. Last winter, Iran halved gas delivery to petrochemical units, which are generally old and need repairs. So, the country is inevitable to reduce costs and reliance on oil revenues.