Iranian / Arab Impotence

This story, summarized by SeekingAlpha, illustrates once again just how ridiculous is the claim made by some revisionists that the "imperialist" West "stole" the Middle East's oil and that justice wasn't served until those countries "rightfully" took back the oil via nationalization. In fact the Middle East -- given its philosophy and culture -- couldn't discover or exploit any of the resource, and still can't even after stealing all the technology and machinery necessary to do it. Turns out that what it takes to succeed is a focus on reality and a respect for freedom and rights, i.e. capitalism -- not the anti-reason, anti-individual, anti-capitalist mentality and policies which hold sway throughout the region.

Despite sitting on 11% of the world's oil reserves, second only to Saudi Arabia, Iran's current output is only 3.9 million barrels a day (of which 2.5m are exported), versus over 6m barrels in the '70s. It recently reduced its 2010 production target from 5m b/d to 4.5m. Iran is facing a natural output decline of 8-10% per year, equal to 200-500,000 barrels a day, and lack of investment. It has signed no firm oil or natural gas contracts with foreign investors since June 2005. Oil sales of $47 billion in 2006 generated half its government's revenue, but lack of refining capacity means that Iran imports 40% of its gasoline. It spends $20b per year -- 15% of its economic output -- on gasoline subsidies to appease its population, resulting in a pump price of $0.35/gallon. That has led to double-digit domestic demand growth, to 1.5m b/d (triple its 1980 level), requiring the country to import 170,000 barrels of gasoline a day at a cost of over $4b in 2006. The government plans to start rationing gasoline in March, an unpopular move that has been postponed numerous times. If demand continues to grow at current rates, some analysts predict Iran's oil exports will dry up within 10 years. Iran buys gasoline from India, which is also planning a natural gas pipeline from Iran to India via Pakistan, and is trying to attract foreign investment from Russia, China and Europe to boost its oil and gas output. But potential partners have signed few deals so far, preferring to see how the political situation plays out. Royal Dutch Shell and Spain's Repsol recently agreed to develop South Pars, the world's largest natural gas field, though a final decision isn't due until end-2007; France's Total is also in talks.

P.S. No doubt that in ten years people will be surprised when Venzuela's and Nigeria's production statistics show the same effect (assuming that the talk of nationalization in both of those countries comes to fruition).