Iran’s Oil Woes Threaten The Mullahs -- Pajamas MediaMuch to the dismay of Ahmadinejad’s government, oil prices seem to be falling. From a record $147 in July, oil is now trading at around $100 per barrel. And despite Hurricanes Gustav and Ike, which usually push the price of oil up, there is talk that prices may go down to $80 or even to the $70 per barrel mark.
“Oil prices are dropping because they are inflated,” says Fadel Gheit, senior energy analyst for Oppenheimer, in an interview with Business Week. “You cannot sustain an artificial price forever. At the end of the day supply-demand fundamentals will take over.” According to an increasing number of analysts, not even the mighty Chinese economy and its insatiable appetite for oil can keep prices at current levels, because a lot of “hype” is involved in estimating future levels of demand.
The Iranians see no hype in the danger which the falling price of oil entails for them. This concern was openly expressed by Iran’s oil minister, who said that as far as his government is concerned, “$100 a barrel was the lowest appropriate price.” Meanwhile, at the recent OPEC meeting, Iran failed to convince other members to cut production, in order to push oil prices up. Therefore, unless there is a serious event, the government of President Ahmadinejad may find itself facing the nightmare scenario of falling oil prices.
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My Comment: Iran's oil wealth run into the hundreds of billions (if not more), but their problem now is on extracting it. Their oil infrastructure is decades old .... with inefficiencies and mismanagement being the rule. The expertise that is necessary to run an efficient oil industry resides in the West, but assistance and investment is not permitted because of U.N. embargoes.
The Iranian Government has been benefiting from the investment and hard work that was done decades ago. The men who made that possible will not come back .... who would in the environment that is Iran today.
Iran knows that it is on limited time. Ethnic tensions, poverty and inflation .... Iran has all the makings of a failed state .... give it time this will become a reality.