Published on November 1, 2013
The economy of Iran is dependent heavily on the lucrative oil and gas sector. But the uncertainties of the oil markets and Iran’s dependence on a single resource for most of its income has created cross reflected incentives to develop a more diversified and globally integrated economy thereby affecting the oil export. Consequently, the sector has been a source of periodic but persistent economic instability. Iran’s oil and gas sectors have had typical structural problems. The Population growth post the 1979 revolution and subsidy in the prices have been prime factors. Supply has been going at a slow pace due to underinvestment related to constraints (financial), technical shortages and sanctions. In context to the above mentioned analysis, Iran has been working on fixing the issue of being the net exporter /importer of oil in the petrochemical market.
Iranian oil export are being ravaged by sanctions, but as per the new president, Hassan Rouhani, the strategies to attract old clients, can be a boost to the country’s economic lifeline. Major chemical players in the world like Japan , China and India that account for half of Iran’s oil exports, have increased their purchases over the past months, raising hope for Iran upto a certain extent. This has undoubtedly complicated the U.S.-led efforts to put pressure on the country over the disputed subject of nuclear program by an attempt to cut off its main source of income. Precisely, China, Japan and India have been granted exemptions to continue buying if their imports demonstrate significant declines during the intervals of six-month.
The Iranian oil exports were increased by 180,000 barrels per day in September last year, that accounts an increase of 29 percent. But the monthly total of 1,170,000 barrels per day still represents a lucid as per various industry sources. Although Iran has the fourth-largest oil reserve in the world, fast paced sanctions imposed on the country over its nuclear program have raised a significant toll. Under the sanctions, (United Nations and others by the United States and its allies) , Iranian oil revenue last year dropped to less than half as compared to the data in 2010 including the oil input.
On the whole, the Arab states have been urged for a considerable re-evaluation of their relationship with oil, invest heavily in renewable energy. Phasing out on subsidies over energy can also be a plus. Revenue from oil and gas will be continued to be used as the funds to develop renewable resources and focus on energy efficiency.
The economic diversification has not significantly spurred the oil revenue and many Arab producers continue to aspire to do the same, leaving most of them exceptionally reliant on highly volatile revenues of oil. Revenue of oil and gas is significant and should henceforth be used for funding. For the same purpose, private investment has to be encouraged and national energy strategies should be risked upon for application and beneficiary aspects. Energy efficiency is the first source of renewable energy in the Arab countries. This thereby implies that, Hydrocarbons are important not only as a source of revenue for Arab countries but also for energy production locally. 97 per cent of domestic demand in the region is being given by oil and gas with renewable resource. Such measures and steps are surely going to impact Iran’s attempt to see an upheaval in its growth as far as the oil sector is concerned and its consequent impact on its petrochemical market.
By – Shruti Acharya
