18 July, 2007

Perhaps they *do* need nuclear power

Or, they might try a market approach to energy. From ISN today:

Iran's oil production has been declining steadily from its pre-revolution peak of 6 million barrels per day (bpd) to its present 4 million bpd - below its OPEC quota - due to war, sanctions, low investment and depletion. Iran's consumption of petrol has increased at 11 percent per year. If the present trend continues, by 2015, Iran will have become a net importer of petrol.

The Islamic Republic's official GDP is approximately US$196 billion. Yet, according to the newspaper Hamshahri, each year, the government spends roughly US$55 billion for the country's energy needs including US$35 million in direct subsidies. In other words, 28 percent of the economic output is spent on basic energy needs. These huge and cheap energy inputs are needed to run the largely inefficient state-owned enterprises, to placate the public with dirt-cheap utility rates and to help out Iran's strategic friends around the world.

Without any doubt, petrol wastage occupies the prime place among all of the various economic distortions in Iran. Despite its enormous oil reserves, Iran imports 43 percent of its petrol needs from other countries due primarily to huge domestic demands as well as lack of sufficient refining capacity.

The country's average daily use is around 70 million liters per day, roughly equal to China's daily consumption, but the latter's population is 18 times larger. Economists attribute several factors for this situation. These include gas-inefficient automobiles, high population growth, the voraciousness of consumers and its super cheap petrol prices.

Until 27 June, petrol was 9 cents a liter, making it among the cheapest in the world. It takes no more than US$5 to fill up a car in Iran, compared to US$40 on the average in the US and US$90 in neighboring Turkey.

1 comment:

Jeremy said...

Perhaps they need to get off the economic nationalism. Some reports have it that a similar situation is unfolding in Mexico. Smart money will wager that it'll eventually come around to Venezuela as Chavez's eggs start hatching.

Scaring off or restricting investment -> rotting infrastructure -> declining production . subsidized prices -> ever-increasing demand -> declining revenue -> collapse, or having to import, or re-allow foreign investment and ownership, or all three.