🚀 go-pugleaf

Gatt wrote:
> "Paul J. Berg" <pjberg@webtv.net> wrote in message 
> news:1183053779.566175.297500@o61g2000hsh.googlegroups.com...
>> `
>> Iranians riot over gasoline price increase and rationing.  Average
>> price for gasoline in Iran is now 38 cents a gallon.
> 
> Is it so wrong to giggle a little about that?   38 cents a gallon and they 
> can't get enough of it.
> 
> "Water, water everywhere and not a drop to drink"
> 

All because they chased investment away:



http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=1749323

Since 1980, energy demand growth (6.4%) has exceeded supply growth 
(5.6%) (5, 7, 8), with exports stagnant since a 1996 peak (Fig. 1). A 
component of this imbalance is Iran's recent oil production decline and 
consequent failure to meet Organization of the Petroleum Exporting 
Countries (OPEC) quota (Fig. 2). Because Iran has failed to meet the 
quota in only 22% of all months since the Iran�Iraq War, the current 
18-month shortfall is anomalous. Whereas two previous 12-month 
shortfalls during the Iran�Iraq War were the result of damage from Iraqi 
attacks, there appear to be no comparable exogenous variables to explain 
the current, longer shortfall. Apparently sensitive to this anomaly, 
Iran recently insisted production would reach quota by April 2006 (9) 
but failed to meet this goal (Fig. 2).

Could these developments indicate that the projected oil export decline 
(5, 6) has already begun?

[ ]

Iran's petroleum investment climate therefore appears to have greatly 
deteriorated since 1998�2004, a period when investment was insufficient 
to offset the recent production decline (Fig. 2). Zero future foreign 
investment thus appears plausible.

[ ]

Iran's gasoline import problem reprises familiar themes. A rich subsidy 
prices gasoline at $0.08 per liter ($0.34 per gallon), which has called 
forth 11�12% demand growth. However, because refining gasoline for 
domestic consumption is unprofitable because of the subsidized price, 
imports are favored over refinery expansion. A NIOC official explains:

Given the fact that our refineries are outdated and that NIOC does not 
have the necessary funds to build new refineries and that the private 
sector does not engage in the business of construction of refineries due 
to the low profits involved, import of gasoline is more economically 
feasible than building refineries (34).

This policy is remarkable. Former OPEC Secretary General Parra estimates 
that if the oil market were competitive, Persian Gulf producers could 
supply the market at $5 per barrel (35). Another study estimated a 
competitive price to be $4�10 (4). Assuming that cost should approach 
price under competition, when Irani oil costing $10 per barrel at most 
can fetch $64 per barrel (assuming Brent price as of this writing, $69 
per barrel, and that Irani oil fetches $5 less than Brent), NIOC lacks 
�the necessary funds� only because an Islamist welfare state strips it 
of the $54 monopoly rent it extracts on each export barrel.

Thus shorn of cash, NIOC must import gasoline at market price. These 
imports have become the focus of a showdown between NIOC and Majlis 
conservatives. To assert more control over petroleum, the Majlis cut the 
gasoline import budget. By fall 2006 import funding will be exhausted. 
As past attempts to raise price or ration fuel have been politically 
impossible, the $2 � 109 to $3 � 109 import funding shortfall will 
probably be found in a raid on the Oil Stabilization Fund (OSF), as 
happened in 2005. However, the OSF pool is not inexhaustible. Amuzegar 
notes the depletion of OSF rainy-day funds for pet projects �at a time 
when the sunshine [of high price] has never been brighter� (36).

Yet the cost of importing gasoline is small compared with losses from 
deferred refinery maintenance. Aggregate refinery leakage is 0.25 � 106 
b/d (10), 6% of total oil production. The implied 2006 loss if price is 
$60 per barrel will be $5.47 � 109. As elsewhere in Iran's petroleum 
economy, because no profit comes from repairing refineries that produce 
only to sell below cost, leaks are ignored. Oil and money simply seep 
back into the ground.