Iran's oil revenue plummets as US oil exports grow

Washington Examiner
Iran's oil revenue plummets as US oil exports grow

Iran missed its oil and gas revenue targets by nearly 30 percent last year, while failing to grab enough money in taxes to make up the shortfall, according to its official news service. As Washington Examiner writes in the article  Iran's oil revenue plummets as US oil exports grow, President Hassan Rouhani's administration "only managed to earn $19.44 billion from taxes and $13.06 billion by exporting oil and its byproducts, showing deficits of $7.34 billion and $5.3 billion, respectively," according to the Islamic Republic News Agency. The government had projected $18.36 billion from selling oil this year, according to the news service.

In fiscal 2017, revenue from oil reached more than $24 billion in the wake of relaxed U.S. sanctions, 45 percent more than in fiscal 2018. Iran also had the benefit of not signing onto a Saudi-led pact to cut oil production among members and non-members of OPEC to drive crude oil prices higher. An oversupplied oil market cut many OPEC nations' budgets in half, forcing them to consider austerity measures, such as in Venezuela, or, like Saudi Arabia, create a long-term plan to move its economy away from oil.

Iran's oil ministry had projected that oil revenue would surge to more than $40 billion in fiscal 2018. But the boom times appear to be over for the Islamic Republic, at least for now, based on the new report from the Central Bank of Iran.

Increased pressure on Iran's oil revenue is expected to come from the U.S. The latest projections from the International Energy Agency show oil and natural gas production increasing from fracking in the U.S., which has remained profitable in the low oil-price environment.

The U.S. oil boom has prompted drillers to increase their efficiency, and they now are able to produce oil at lower cost than their foreign rivals. The Energy Department's latest annual outlook shows the U.S. becoming a net oil exporter by 2020, after becoming a net natural gas exporter last year. That will increase the pressure on Iran and crude oil from the Mideast.

Even more shocking for OPEC countries are reports that for the first time OPEC producers have begun importing U.S. crude oil. Republicans on the Senate Energy and Natural Resources Committee circulated the news reports on Friday, touting the shift to American oil.

U.S. global oil shipments soared from 100,000 barrels per day in 2013 to 1.53 million barrels per day in November 2017, according to Bloomberg. "One recent shipment even went to the United Arab Emirates," according to the report.

"The tremendous growth in responsible energy development has boosted our nation’s economy and security while providing our strategic allies with a reliable trading partner," the energy committee email read. "That’s the power of American energy."

The U.S. exported nearly 700,000 barrels of light domestic crude oil in December to the United Arab Emirates, according to new Census Bureau data. Energy Information Administration data showed it was the first shipment of U.S. oil to arrive at the port of the fourth-largest OPEC producer, according to Bloomberg.

The U.S. export market for natural gas and oil also has surged in countries such as China, which is a key export destination for Gulf crude oil and natural gas producers, as well.

That likely will stoke tensions among the U.S., its Gulf allies, and Iran, which could be seen on Friday. Hezbollah, the Iranian-backed Shia political party based in Lebanon, accused the Trump administration and its Gulf allies of planning to take over Syria's oil and natural gas wealth, the government-sanctioned Mehr News Agency reported. Syria is one of the only major crude oil producers in the Eastern Mediterranean.Hassan Nasrallah, secretary general of the Lebanese Hezbollah, made the remarks during a televised commemoration ceremony in Beirut on Friday. "He stressed that the U.S. is waging a war over taking the control of all oil and gas fields from the east of the Euphrates to the Persian Gulf," Mehr reported. Nasrallah made the statement a day after Secretary of State Rex Tillerson was in Beirut, where he warned Hezbollah to stay out of Syria. With the U.S. now the world's top oil and natural gas producer, arguments that the U.S. plans to take the region's energy wealth seem to ring hollow. Nevertheless, the U.S. does stand to take a chunk of the region's market share through growth in its exports.