Future Oil Price War as Iran Sanctions Get Lifted

Economic sanctions have cut Iran’s oil production in half and dropped oil exports to less than 20% of normal. Iran’s oil production is currently below 2 million barrels per day and Iran has about 300,000 barrels per day of oil exports.

source: tradingeconomics.com

Biden is expected to lift sanctions if Iran returns to strict compliance on its nuclear program.

US independent producer Pioneer Natural Resources chief executive Scott Sheffield expects Iran returning to oil exports as an early 2022 event. He sees this as mid-2022 for Iran to bring on 1.5mn-2mn b/d of exports.

2 million barrels per day of additional global oil supply is enough to swing the marginal price of oil from $60 per barrel to $30 per barrel. Therefore, Saudi Arabia will likely initiate a price war to force other oil suppliers to shoulder more of the oil production cuts and to make Iran minimize its re-entry into global oil markets.

Currently, there is an oversupply of oil. OPEC and Russia have negotiated a delicate agreement to cut oil production to support prices.

Saudi Arabia had to launch an oil price war in 2020 against Russia to work out the terms of the oil production cut. Saudi Arabia and Iran are regional enemies and oil competitors. The last time sanctions were lifted there was also an oil price war with Saudi Arabia and Iran.

SOURCES – Tradeeconomics, Reuters, Argus Media
Written By Brian Wang, Nextbigfuture.com

21 thoughts on “Future Oil Price War as Iran Sanctions Get Lifted”

  1. I must have missed the part where Iran won something. As soon as it gets back on the market it will be subject to OPEC export caps.
    The USA hasn't lost anything either. Americans love cheap gasoline. They've also had enough time to build out their domestic fracking system, whichcreates enough fuel to make it become an exporter.

    By the time this new oil source runs out, we will all be operating fusion powered flying cars.
    The world will never run out of oil. We'll just lose interest in drilling for it.

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  2. I wouldn't put too much stock in this article. Basically, the Iranians have never been in compliance. Even when they signed the agreement during the Obama administration they weren't in compliance. Obama thought that the agreement would help to strengthen the moderates in the Iranian regime, but that was misguided at best. The Ayatollahs can only stay in power through murdering and terrorizing its own citizenry. There was never any chance the regime was going to reform, because any move towards democracy would have meant the end of the Islamic Republic. No dictatorship has ever successfully democratized and stayed in power. Obama was deluded to think this time would be different.

    The worse news for Iran is that its gone to far down the road heading away from compliance to back track. Any such move will be rejected by the hard liners because they would lose face. Dismantling their nuke weapons development would be a defeat. Even giving up the weapons grade plutonium they've enriched (or is it uranium, I can't remember) would make the regime look weak. Ergo, Biden's "strict compliance" requirement is a bridge too far for them.

    Chris68

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  3. You' re deluded if you think the Iranian government is going to agree to strict compliance. They didn't even do that when Obama was President. It was well known that they weren't complying even before Trump was elected. That's why he put the sanctions in place. Not even the Europeans think they're going to comply.

    NBF definitely needs to come back to this story in 6 months. Sanctions will still be in place.

    Just saying!!!!!!

    Chris68

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  4. True.
    The largest sponsor of terror in the world happens to be the largest economy in nominal dollars.
    Just saying
    Go Iran!

    Lukha

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  5. At a guess it's Iranian oil production, in 1000 barrels of oil per day. The line drops to just below 2000, and the text above the graph says that Iranian production had just dropped below 2 million barrels per day.

    But yes, unlabelled axes and the Y axis not starting from zero are both signs of evil.

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  6. Eh… The idea that less poverty means less terrorism sounds reasonable, but Saudi Arabia isn't famous for being poor or terrorism free.

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  7. To quote actual government figures for the car example above

    2010 Audi S6, 12.6 L/100km 0-100 5.2s

    2020 Audi S6, 6.2 L/100 km 0-100 5.2s

    So, actually, they HAVE doubled efficiency in the last decade.

    Whether another doubling is feasible is a different matter entirely.

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  8. The Persian Nazis will be reduced to selling Pistachios in the long run unless they can drink crude oil.

    You are going to Hell, the literal one, my Lucerfarian friend!

    Just Sayin! (pack your asbestos underwear.)

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  9. While you are worrying do remember Pakistan has the bomb for decades now. Nothing like a full stomach to reduce the risk of terrorism.

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  10. That first graph is annoying with no indication of what the Y axis is.
    At least the X axis can be reasonably guessed to be years over the last few decades.

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  11. Actually, in the sense of the timeframe what you say is correct. Electric vehicles will not make the difference in the short run they will in the long run. That being said, electric vehicles are innovating at a far greater pace than ICE vehicles, with prices dropping and quality rising at a comparable pace to solar panels. Over that 10-20 year time frame, demand for oil will drop at a geometric pace, while at the same time access to economically viable oil deposits will continue to decline. Battery lifetimes are already at the 2 million mile mark, range is excellent, the only real things lacking are faster recharge time and the infrastructure in our power grid to handle the extra load. ICE engines would have to double or triple their efficiency to stay relevant long term and that has not happened since their early days.

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  12. And I guess this means more financing for terrorism in general plus a stronger regional power of Iran? Plus, Biden will never ask for any unannounced inspections anyway, so the nuclear program in Iran will speed up.

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  13. I think that now, and over the next 2 years, it's more the threat of EVs than any measurable drop in consumptions attributed directly to them.
    Right now the big issue (world pandemics aside) is that a 2020 Hybrid Camry is doing 4.7 L/100 km, compared to about twice that for a Camry as little as 10 years ago. A turbo diesel Audi S6 is doing 6 L/100 km compared to 15 for a 2010 S6 V10, and similar numbers apply to a huge proportion of all the new cars in the showrooms. After resting on their laurels for 25 years the automotive engineers finally got their mojo back and have been smashing fuel consumption numbers in the 20-teens.

    (That's a bit harsh really, the automotive engineers have been wasting their time trying to reduce nitrous oxides and unburned hydrocarbons from negligible to undetectable to meet ever tighter environmental regulations. This predictably resulted in higher fuel consumption because you get those low pollution numbers by burning them up in catalytic converters (which takes energy), reducing high temperature combustion conditions (which reduces efficiency), stuff like that. The addition of CO2 to the list of pollutants (as ridiculous as it sounds on the face of it) allows the car companies to get back to trying to make the vehicles efficient, and that is what is smashing the oil producers.)

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  14. Well, no. But, maybe. Because the fuel industry is going to continue to see the impact of electric vehicles. This likely won't play a part in any price war between oil producing nations, though. Not that I can tell, at least. Unless it figures into their price strategy. I suppose it could, actually. I'm just having issues wrapping my mind around what that looks like to a consumer. If you're already driving an EV, it currently looks like nothing (says the guy driving a 1999 Acura).

    Reply

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