The crash of the helicopter carrying Ebrahim Raisi and his entourage, followed by the change of the head of government, signifies the beginning of a new chapter in the Iranian regime’s domestic policy, foreign affairs, and energy diplomacy.
Iran’s energy industry faced numerous challenges during Raisi’s administration, but after his helicopter crash, regime media frequently talked about the increase in Iran’s oil exports in recent years despite ongoing U.S. sanctions and the successful diplomacy of Raisi’s government.
According to the International Energy Agency, Iran spent $100 billion on energy subsidies last year, which could undermine the government’s efforts to reduce the budget deficit. Ultimately, the financial burden of these subsidies will fall on the people, who often face inflation and reduced purchasing power due to government borrowing.
Iran’s $36 Billion Oil Exports in 2023
On March 21, Mohammad Reza Rezvani-Far, Deputy Minister of Economic Affairs and Finance and Head of Iran Customs Administration, stated that Iran exported $35.87 billion worth of oil, $370 million worth of electricity, and $1.293 billion worth of technical and engineering services last year.
Increased Oil Exports by Offering Greater Discounts to China
The topic of increased Iranian oil exports in recent years, especially during Raisi’s presidency, is highlighted by the fact that China, as a major buyer of Iranian oil, has benefited the most from importing cheap oil from Iran following the U.S. withdrawal from the Joint Comprehensive Plan of Action (JCPOA).
Nevertheless, independent energy experts, citing statistics and global oil prices, have expressed doubts about the amount of Iranian oil sold last year.
If, according to the oil minister Javad Owji, Iran managed to sell $35 billion worth of oil and gas condensates last year, it should be noted that part of this export, as previously mentioned by Owji, came from gas condensates stored by the previous government (about $5 billion).
Considering the price of oil at $83, if the cash sales figure claimed by Owji is divided by the average oil price, the price of the oil sold can be easily determined.
Last year, Iran received payment for only 1.153 million barrels of oil per day.
For example, if the Oil Ministry claims exports of 1.25 million barrels per day, the discount amounts to $3 billion, which is 8%.
If exports were 1.5 million barrels, the discount would be $10 billion, or 28%, and if exports were 1.8 million barrels, the discount would be $19 billion, or 54%.
It is noteworthy that sanctions not only impact export discounts but also lead to reduced production and the deterioration of oil industry equipment.
The Unsolvable Problem of Energy Imbalance
Despite the efforts of various governments in Iran over the past decade, the problem of natural gas and gasoline shortages has not been fundamentally resolved. Gholamreza Dehqan Nasrabadi, a member of the Iranian regime parliament, pointed out: “Energy imbalance is a reality. In the gas sector, the average annual imbalance is 132 million cubic meters, and during peak consumption, this amount reaches 315 million cubic meters per day, leading to gas cuts in industries and a halt in gas exports, which affects the country’s foreign exchange earnings.”
Continued Imbalance in Gasoline Production and Consumption
The gasoline imbalance is related to various factors, such as the aging of vehicles.
Iran-made cars consume twice as much fuel as the global standard, and if global gasoline consumption standards were applied to domestically produced cars, Iran could reduce its daily gasoline consumption to 60 million liters and earn $15 billion by exporting 50 million liters of gasoline.
Imbalance in the Diesel Sector
Until last year, there was a balance between diesel production and consumption in Iran, but gradually the imbalance in diesel production and consumption became apparent. However, it should be noted that diesel consumption differs from gasoline.
According to official statistics, about 20% of the diesel allocated to power plants in the country is smuggled.
To partially address the diesel imbalance, Raisi’s government imported approximately $830 million worth of diesel last year.
Emergency Plan to Increase Iran’s Oil Production Capacity
At the second meeting of the Economic Council, chaired by acting president Mohammad Mokhber, the plan to increase crude oil production by the National Iranian Oil Company and the plan to reduce petroleum product consumption were reviewed and approved.
According to this plan, the country’s oil production must increase from 3.6 million barrels per day to 4 million barrels per day, which would increase crude oil production by up to 400,000 barrels per day.
This plan was approved despite the current oil production capacity of Iran not reaching 3.6 million barrels per day, and the next government will also not be able to easily increase Iran’s oil production capacity to 4 million barrels per day in the short term.
One should not overlook the gradual decline in Iran’s oil production capacity, as 80% of Iran’s oil wells are in the second half of their production life.
The current situation of Iran’s energy industry has become more complicated due to international sanctions and weak infrastructure.
The reduction in foreign investments and fluctuations in the global oil market have exacerbated these problems.
