The current oil price is the minimum possible
An interview with Nersi Qorban, an economy expert
With a survey on the demands and supplies of the market, we would find out that the current oil price is the ultimate slump.
According to the Iranian oil minister, the next fiscal year would be a hard one for the oil suppliers and demanders. He believes that the current economic situation of the world, oil demands slump, and the oil price fall are the reasons for this prediction. Here is an interview with Nersi Qorban, an economy expert, on the issue.
What is a reasonable oil price in next year’s Iranian budget?
Experts can not have definite predictions on the exact probable oil price. It is the government who is aware of its expenditures. Anyhow, the oil price on the next fiscal year may be 50 or 60 dollars a barrel. So the budget should be devised with a price less than that.
According to predictions, the income deficiency of Iran would probably reach 54 billion dollars. Do you believe so?
If the oil price stays the same as today, such prediction is reasonable. As you know, the average oil price in the last fiscal year was 100 dollars a barrel; and now it is 50 dollars a barrel. A huge sum is missing.
Is it possible to manage the country with 5 dollars a barrel? So what about the impact of falling oil prices on the suppliers?
The mere economic production of oil costs more than five dollars for Iran! So if the oil prices reach 5 dollars a barrel, oil production would be of no economic advantage for Iran.
There are 2 million extra oil barrels in the supplying market. Why is it so?
The economic recession, the problems in banks’ exchanges and the absence of required financial mechanisms in the market have led to the demands’ slump. This is the main reason for extra supply.
But during its informal meeting in Cairo, OPEC did not make any decision for a production decrease. The formal OPEC meeting is going to be held on December 17th in Algeria; and the final decision in the probable oil production decrease will be made in that meeting.
What is your prediction of oil price fluctuations?
It is hard to predict the oil price. The current oil price is the ultimate slump. The development of the future oil production would not be done according to the current prices. So even if the prices fall again, then they would get to the normal level in a year and a half. At the same time, one should notice that when the oil prices fall, the demands get higher. So we can approve this claim that the current price is the ultimate slump.
Due to the current financial crisis, the oil customers are now losing their ability to buy more oil. Despite this fact, how can the demands for oil be on the rise?
It is only the western countries who have lost the power to buy more. The majority of oil demands are still coming from Middle East countries, China, India and the US. As you know, the financial ability of Middle East countries, India and China has not decreased. Even the US-which is caught in the financial crisis- prefers to buy the 50 dollars a barrel oil than the 100 dollars’ one.
The oil price fluctuations are results of mental and physical factors. These were the factors leading to high oil prices before the financial crisis; and now the same factors led to oil prices slump. This fluctuation is the nature of the market.