Crude estimate

Dave Schuler, as he often does, points out something that a lot of the pundit class has missed:

Most commentators seem to believe that as soon as sanctions are lifted Iran will begin selling oil.

At $60 a barrel, what can go wrong? This: Iran has to earn at least twice that to break even on production.

Or, in Schuler’s words:

Iran’s profit-maximizing strategy requires the price of oil to go up or, failing that, for Iran to leave its oil in the ground until it is able to produce oil at a lower cost.

That in turn leads to two observations. First, if Iran sells oil at all it means that it’s absolutely desperate for foreign exchange. And, more disquietingly, expect Iran to foment instability in the Middle East. Stability is bad for business.

That particular business, anyway.

3 comments

  1. McGehee »

    17 July 2015 · 1:35 pm

    They’re much more efficient at exporting Islamic revolution.

    Hey, remember when a hostile power’s habit of exporting revolution was something we wanted to curtail? Good times, good times.

  2. Joseph Hertzlinger »

    19 July 2015 · 12:09 am

    Is this a case of losing money on each barrel but making up for it with volume?

  3. CGHill »

    19 July 2015 · 12:23 am

    Something like that. Still, I figure Iran is probably better off than Venezuela, which has to ask the same price but which has practically no exports other than oil, and the Chávistas, sworn to socialism, are about two orders of magnitude dimmer than the mullahs.

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