Iran

Conspiracy theories abound around the oil price fall. A 25 per cent drop in less than three months is certainly exceptional and the assumption is that in a politically driven market a political decision by someone, somewhere must have forced prices down. The most popular conspiracy theory is that the US and the Saudis have combined to take money away from their major enemies – Russia and Iran. In both cases, [the argument goes], a shortage of revenue could help to bring President Vladimir Putin and the Supreme Leader, the ailing Ayatollah Ali Khamenei, to the negotiating table to sort out a deal on Ukraine and Iran’s nuclear ambitions.

In a complicated world anything could be true. I don’t happen to believe the conspiracy theory but I accept that it is a possibility. To me the interesting thing is what happens next, and that is down to the Saudis. The risk for the whole industry, and for many countries dependent on oil revenues, is that Saudi Arabia’s games have led them to lose control of the market. Prices could go a good deal lower with wide and mostly negative consequences, starting with more regional instability and a cutback in investment which can only feed the next cycle. Read more >>

The Brent oil price has now fallen by 15 per cent in less than three months and is now below the psychologically important figure of $100 a barrel. Last week I wrote about the reaction in the industry. But the fall is beginning to have political consequences as well.

Brent Crude Oil Future three month chart

Across the world oil producing and exporting countries have come to rely on high, and ideally rising prices. Some countries save the revenue for a rainy day, but most, especially those with rising populations, tend to spend. Circumstances vary, as do the realistic options for adjustment, but the current concern is real and will shape political actions well beyond the oil sector itself. Read more >>

The US energy sector must be bitterly annoyed with President Obama. The deal with Iran agreed in Geneva over the weekend does not lift sanctions but it sends an unmistakeable signal that the door to doing business is opening again. Many many companies around the world will be flying in, most with the full support of their Governments. The only ones who won’t and can’t are American companies forced to respect to the letter every sentence of the sanctions legislation until it is repealed. Read more >>

Nowhere is the failure of the talks between the international community and Iran over Tehran’s nuclear programme more welcome than in Riyadh. A fudged deal would have given legitimacy to the government in Tehran and confirmed the weakness of the strategic alliance between Saudi Arabia and the US.

More important still, it would have raised the prospect of the Saudis having to make serious cuts in oil production and exports to support the price of the output from Opec, the oil producers’ cartel. These are cuts the kingdom can ill afford. But, sooner or later, Iran will be on its way back into the oil market. Read more >>



The sanctions imposed on Iran are not working. The Iranian economy is in a mess with shortages and inflation. But, as a very interesting paper just published by Patrick Clawson of the Washington Institute shows, it is not collapsing. Non-essential imports have been cut back and a range of exports – including minerals, cement and agricultural products – are actually growing. Iran’s main trading partners are Iraq, China, the UAE and India. Unemployment is high and no one believes the official figures, but it is probably lower than that of Spain. And, most seriously, oil sanctions are breaking down.

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