Iran sells oil at lower prices

The controversy related to the monopoly of oil, has given a new dimension to the present caricature. Iran has finally shrugged off its dogmatic attitude from itself, related to oil.

Oil prices have been eased below $70 a barrel on Friday on expectations of a long delay before the United Nations decides on sanctions against Iran.

With crude-oil output estimated at 4.1 million barrels per day, Iran is the world's fourth-largest oil-producing country. Only Saudi Arabia (9.6 million barrels), Russia (9 million) and the United States (5.3 million) produced more oil last year. Moreover, according to the authoritative journal World Oil, Iran has 105 billion barrels of crude-oil reserves -- nearly five times the size of U.S. reserves. Iran's reserves, which comprise 10 percent of the world's total, are exceeded only by those of Iraq (115 billion barrels) and Saudi Arabia (262 billion).

The ability of Iran to cause worldwide economic damage is no idle boast. Worldwide oil demand and supply are in precarious balance at the moment, a condition expected to remain for the foreseeable future. On the margin, therefore, Iran's 4 million barrels per day are extremely important, all the more so given that nearly 3 million barrels are exported.

As the nuclear standoff with Iran has escalated, the price of oil has risen, approaching $65 per barrel. A crisis with Iran that removed millions of barrels per day from the world market could send the world oil price well beyond the $100 level, possibly tipping the world into a recession whose depth and duration are unknowable.

It is worth recalling that the world oil market has previously experienced the removal of millions of barrels of Iranian oil and the consequences weren't pretty.

In September 1978, Iran produced 6.1 million barrels per day. Then the Iranian Revolution took place. It reduced the country's oil output by more than 5 million barrels per day by early 1979, causing oil prices to soar. Iranian output recovered a little, but then war broke out with Iraq in September 1980. Output collapsed again; world prices soared even higher; consumer price inflation in the United States reached double digits three years in a row (1979-1981); and America's worst postwar recession produced an unemployment rate of 10.8 percent in late 1982.

Projecting the pathetic condition of past, America along with United Nations have tried to act smart successfully, in accordance to the uranium enrichment issue turned against Iran. The U.N. watchdog, the International Atomic Energy Agency, said on Thursday that Tehran had failed to meet an Aug. 31 deadline to halt uranium enrichment.

U.S. President George W.Bush said Iran must face consequences for failing to meet the deadline. The Iranian situation really has been expected by most market participants, that Iran would not agree to stopping uranium enrichment and also that China and Russia are likely to veto any U.N. suggestions of sanctions. Russia's foreign minister has even casted doubt upon whether the U.N. Security Council can reach quick consensus on punitive measures against Tehran.

Iranian President Mahmoud Ahmadinejad has also shrugged off the threat and insists Iran will not halt uranium enrichment, which the West says Iran is using to make atomic bombs. Tehran says it wants to build nuclear energy plants, not weapons. To tackle with the present detoriating scenario of sanctions, Iran had to chop off the high price barrier. Thanks to Iran, for what it did is found to be extremely beneficial to the world.