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ICCIMA Official: Cordial Ties to Neighbors Key to Restoring Lost Oil Market Share

May 5, 2021, 7:58 AM
News ID: 35093

EghtesadOnline: The era of high demand for oil and petroleum products will not be as before, most experts and analysts say. Nonetheless, Iran still has the opportunity to restore its lost market share if it carefully avoids conflict with neighbors, especially Saudi Arabia, the head of the Energy Commission of Iran Chamber of Commerce, Industries, Mines and Agriculture said.

"Even if the ongoing nuclear talks between world powers and Iran in Vienna yields positive results and sanctions are removed, Tehran cannot resume oil exports as intended unless it restores cordial ties with the region," Ali Shams Ardakani was quoted as saying by ILNA. 

Improving bilateral and multilateral relations is the most effective way to restore Iran’s presence in the competitive international market, he added.

Iran's oil exports, which reached close to 3 million barrels per day in 2011, has fallen to as low as 500,000 bpd in the last three years after the US imposed an economic blockade in 2018.

The veteran economist believes that oil demand is very likely to halve in the next 50 years. He says decline in demand due to the rapid emergence of alternative energies, for example in public transport, is gradually creating a bigger space for EVs.

“Keeping away from unnecessary clashes with Saudi Arabia can definitely help the National Iranian Oil Company to secure its foothold in the Chinese market.”

In a TV interview last week, Saudi crown prince, Mohammed bin Salman (MbS), struck a rare conciliatory tone, saying he prefers “good” relations with Tehran.

“Iran is a neighboring country and all we aspire for is a good and special relationship with Iran,” MbS said.

Riyadh cut off diplomatic links with Tehran in 2016 and has often accused it of adopting “destabilizing” policies and supporting proxy militias in the region, including the Houthis in Yemen where Saudi Arabia is leading a deadly military campaign. 

The absence of normal diplomatic relations have taken a toll on diverse economic sectors, namely the power industry, and pursuing the same policy will further endanger national interest, Ardakani added.

The former diplomat and senior government advisor noted that ending talks to buy shares in refineries of other countries like South Africa, South Korea, India and Senegal was a strategic error of judgment. “That could have helped the country secure its international oil market share.”

According to the ICCIMA official, renewable energy, primarily wind and solar, will be the fastest growing energy sources come 2050 due largely to the rapid development and investment in these areas. 

However, demand for oil will continue to grow in poorer countries, where the use of electric vehicles can be limited for reasons of economy and low environmental standards.

Global attention, more so in the developed world, is increasingly moving toward clean energy to mitigate the risks of climate change. Given its huge emission footprint, the energy sector – including oil and gas – is at the heart of the discourse on ways to cut greenhouse gases and save the planet. 

Demand growth for gasoline and diesel between 2021 and 2025 is set to weaken further as more countries introduce policies to improve efficiency and cut CO2 emissions while investing billions in electric vehicles. 


National Resources

In related news, the Persian-language daily Arman quoted Ardakani as saying that oil and gas are national resources that belong to future generations. 

“It is indeed regrettable that oil revenue is still squandered on current [government] expenses instead of investment in infrastructure.”

Drawing an analogy between Iran and Turkey, he said daily liquid fuel consumption in the former is almost 5 million barrels, while the latter's total fuel consumption averaged 860,000 barrels per day in 2015. Turkish consumers pay 25 cents in tax for a liter of fuel.

In the past four years, the price of gasoline in Iran not increased whereas tariffs for electricity and gas have risen on a regular annual basis.

Criticizing Iran’s Management and Planning Organization, Ardakani said oil revenue must be invested in the critical scientific and petrochemical sectors.

"Revenue will be wasted unless it is reasonably spent on expanding manufacturing industries that will not only generate income but also create jobs.”