By Lenny Ben-David
Producing oil in some Arab states is almost as effortless as it was for Jed Clampett of
Lifting cost for other countries is not that much higher than in
There are also “finding costs” for exploration and development of oil fields – about $5.26 per barrel in the Middle East to as much as $63.71 for U.S. offshore oil. Add to that taxes, transportation and refining costs. Nevertheless, the markup on the black gold is remarkable. As of this writing, the price of crude oil dropped to some $90 per barrel. In July, oil prices hit $147.
Saudi Arabia produces some 9,600,000 barrels of oil a day. Do the math: at $90 per barrel, the oil sheikhs and princes earn almost $900,000,000 (spelling it out, that’s nine hundred million dollars) a day.
Pipelines and shipping routes may emerge as the new targets for international terrorists.
With the American deployment of troops in
If that’s not a big enough reason for the
The vast riches now flowing into the oil producers coffers are certainly lining the pockets of local leaders and oligarchs. But in some cases, the oil producers are undertaking ambitious and costly development programs and acquisition of new weaponry. Currently the income from oil usually exceeds the expenditures, but each country has a “break-even” point. If the oil income drops, the economic stability of the regime starts to rock.
A recent interview by a senior official in the International Monetary Fund (IMF) illustrates that point.
Other Arab countries in the Gulf have much lower break-even points, according to the IMF official: “The United Arab Emirates (UAE) will have a fiscal balance at an oil price of $23; if it goes below they would run a deficit. For
Short and simple: if the price of oil drops below $90 per barrel, the Iranian regime is in fiscal trouble.
This week some November futures dropped to $83, the lowest in a year.
OPEC, however, facing the downturn in western economies, is considering cutting oil production to keep the price high.
In today’s possible return of the Cold War,
Forty percent of the world’s petroleum travels through the 180 km-long Straits of Hormuz, effectively controlled by
Meanwhile, a pipeline through the UAE that would bypass the Straits of Hormuz won’t be ready for at least a year, and one wonders if it won’t be the target of terrorists to keep it from opening. A recent terrorist explosion in
Pipelines and shipping routes may emerge as the new targets for international terrorists. They are relatively easy targets, and the skittish oil markets will react in ways that further hurt Western economies. It comes down to the well-known question: Cui bono? Who gains?
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