As diplomats consider possible actions to try to alter Iran’s stated desire to build a complete nuclear fuel cycle for peaceful power production, they would be well advised to take a hard look at the current oil markets.
Iran exports approximately 2.5 million barrels of oil per day from its 4 million barrel per day production. For the past couple of years, the prices for those exports have exceeded OPEC’s 2002 target price by $10-30 per barrel. Here is one of many historical articles from that time period that helps us remember what it was like way back in December 2001 when the price of a barrel of oil was less than $20.00.
Though Iran does not publish much information about its finances, simple math shows that they could have accumulated a substantial cash balance, especially when that amount is compared to the amount that they would have expected to accumulate if oil prices had remained in the already profitable range of $22-28 per barrel that was the established goal as recently as 4 years ago.
Iran might very well have the financial strength to go without oil income for a number of months. Based on the reaction of the oil markets to the disruption caused by Hurricane Katrina, which removed a little over 1 million barrels of oil per day from the market for a few weeks, it is not difficult to predict that the removal of 2.5 million barrels of oil per day would cause substantial pain for the world’s energy consumers.