Iran Suffering from Own Version of Peak Oil

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What’s going on in Iran? When the old guard starts shooting the young people, that’s not a favorable sign for the long term.

Last time Iran had a revolution, in 1979, it ushered in turmoil in the oil (and gold) markets for several years. Of course, the invasion by Iraq in 1980, and subsequent war, had something to do with it as well.

After 30 years, the Iranian theocracy – and well-connected family and friends – has pretty much taken over that nation’s economy. Most everything that’s worth owning – oil facilities, banks, industrial facilities, etc. – has some ‘revolutionary’ connection. And these folks are not going to walk away from it without a fight.

There are clearly a series of major disconnects within Iranian society. Young versus old, middle-class versus theocrat, reformer versus revolutionary. And then there’s the oil problem. Mr. Depletion and Ms. Rust.

Iran is suffering from its own version of Peak Oil. Iranian net exports of oil are falling. Iran’s oil infrastructure is aging. According to the U.S. National Academy of Sciences, the trend is that Iran will be exporting ZERO oil by 2014, which is a mere five years from now. That means almost no serious money will be coming in for the Iranian leadership and government.

So if you think that they’re rioting in the streets of Iran now, just wait awhile. Iran is headed for national insolvency and penury. It’ll get even more exciting. Then again, the Iranians may have nuclear weapons. Pretty depressing, huh? Better buy that gold while you can.

Byron King
for The Daily Reckoning Australia

Byron King
Byron King currently serves as an attorney in Pittsburgh, Pennsylvania. He received his Juris Doctor from the University of Pittsburgh School of Law in 1981 and is a cum laude graduate of Harvard University. Byron is also co-editor of Outstanding Investments.
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25 Comments on "Iran Suffering from Own Version of Peak Oil"

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K Warner
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If all this is true, then there can be only one solution that can save them and that is to develop nuclear power to fulfill their domestic requirements. The oil not used can then be exported to earn money for internal use. Perhaps to the Iranians then, giving up nuclear power would be the same as committing the nation to near-term poverty and chaos which is why they are not willing to buckle to foreign demands. Even if they did buckle, the chaos will still ensue and the hostility would not lessen from those foreign nations.

Stu
Guest
Just cracks me up how nobody can talk about anything in Iran without someone having to have yet another crack at the “Evil White Culture” in some way or another. Religious fanatics kidnap US diplomats and hold them hostage while taking over the country….somehow it’s whitey’s fault….they then repress all other religions, culture, etc etc……introduce sharia law including stoning to death for things like adultery and all cultures are equal and it’s still whitey that is the big bad guy in the world. They hang juveniles for alledged sex acts supposedly committed years before….fine….can’t touch the whitey for pure evil… Read more »
Don
Guest

An interesting link as a background to this:

http://www.payvand.com/news/07/jan/1142.html

Isaac H
Guest

“Then again, the Iranians may have nuclear weapons. Pretty depressing, huh? Better buy that gold while you can.”

Come on Mr King……….yes scare everyone to buy gold.
Mr King…. Iran would be hard pressed to build/design a assault rifle little lo than to have the ability to build or buy any type of nuclear weapon.
And then work out what the hell they could do with it?………nothing!

Ned S
Guest
Pretty depressing for the Iranians I’d say – The Israelis would love to get that dirt on them! And good ole Joe Biden is in there stirring the pot … Ah, politics, politics, politics! But then Yes, it is a bit silly and alarmist – Even Mossad reckons Iran aren’t going to have a nuke until 2014 earliest: http://www.reuters.com/article/topNews/idUSTRE56507F20090706?feedType=RSS&feedName=topNews Plenty more time for hand wringing, Pontius Pilate posturing, sabre rattling, enlisting allies and seeing where it all leads before Uncle Sam can really hope to justify playing the weapons of mass destruction card again surely? I suppose a few kilograms… Read more »
Coffee Addict
Guest
Isaac, Ned I don’t underestimate Iran’s military capability. My understanding is that they have a few small tactical nuclear warheads and the missiles to deliver them. The nukes were purchased though Mafia sources during the early 90’s, and as Ned says, Iran is yet to manufacture its own. Iran’s defence industries manufacture advanced jet trainers (they are a bit like the UK’s Hawk), assault helicopters, tanks and small arms. Their key facilities are defended with advanced radar and SA9 ?? missile systems. Iran’s airforce is no match for what the US has but some of their stuff is modern. On… Read more »
Greg Atkinson
Guest

C.A..I seem to recall we heard pretty much the same story about Iraq a few years back. Having modern weapons is one thing, being able to deploy and use them effectively is another thing. I doubt Iran could move a hamster from one cage to another without a dozen sensors going off in the Pentagon ;)

Coffee Addict
Guest
Hi Greg. Trust me on this one. On the surface the Iran and Iraq stories are presented in a similar vein but there are differences underneath. Iran has a much greater conventional defence capacity and unlike Iraq there have been no long term economic trade sanctions against Iran What is bringing the hardliners down are: fuel shortages, inflation, unemployment, declining infrastructure and the departure from office of Bush. With Bush gone the hardliners have no credible bogey man to rally against. If the hardliners are tossed out the other points of dispute may just fade away.
Ned S
Guest
Got to admit that I mightn’t be heartbroken to hear the current Iranian regime had unravelled of its own accord? But that certainly doesn’t make me feel inclined to nudge it. But then I’m biased – Back when I was a boy, regime change wasn’t widely accepted as a good reason for trundling off to war. And I do know that the West can work quite happily with cultures that have plenty of primitive ways – Providing they cough up their natural resources and/or other tradable goodies without causing us too much grief. Maybe if we’d just be up front… Read more »
joe w.
Guest

Same problem, even worse, for Mexico. They will be at zero oil export in 2012. With the economic crisis bottoming out the, they have no chance for recovery. Dark times to come.

Richo
Guest

Iran will need either nuclear or solar energy to replace oil. Not a lot of other options in al landlocked country like that.

Greg Atkinson
Guest

Richo that is why they are probably trying to get some reactors online. In fact across the Middle East quite a few nuclear power plants are slotted for construction because oil rich countries would rather export oil than burn it to generate electricity.

Ross
Guest
I have never read as many poor posts on DR as I have here. Iran is pluralistic … it has direct minority representation and its jews generally stick up for their government and have always had a safe haven there. As for economics they have domestic issues with populism and inflation. They have rigorous domestic debate on these issues. and yes CA they have had enduring US economic / financial sanctions which is worth 32% of Iranian GDP at last count. Now if any liberal western country had 32% knocked off its chit how would it be going right now?… Read more »
jimbo
Guest

Iran is not land locked. The Iranians(Persians) are not afraid to fight. They fought Iraq when Saddam was in charge. As the Persian empire, it waged war to acquire new territory. Iran has many mountains and is much bigger than Iraq. The Americans would be sorry if they tried taking over Iran. It would not be a push over as Iraq has been.

Ned S
Guest

Ta Ross – You don’t happen to have any thoughts on why the US has a “thing” about North Korea do you?

Greg Atkinson
Guest

Ross I am guessing you mean Gulf of Tonkin?

You sort of lost me with liberal fascism bit..are you simply saying that U.S democrats don’t mind bombing stuff either?

As for chemical weapons..they were used way before Churchill’s day.

Ned S
Guest

Australians do have a very long track record of being global sheep despite what our preferred self perception might be – “All the way with LBJ” predated by “Australia will be there” come to mind?

Coffee Addict
Guest
Ross: You are correct on the economic sanctions issue and I was wrong. I had heard that it is easy for Iran to get around some sanctions but I accept that the underlying impact of the sanctions is significant. I guess the lack of investment in a petrochemical industry may be partly due to sanctions and partly due to the perceived vulnerability (to agression) of any such investment. I stand firm on my view that any agression against Iran, in current circumstances, is unlikly and (unlike Iraq) Iran has a very strong capacity to defend itself. Do you have any… Read more »
Ross
Guest
Greg, Liberal Facism is something that I think was coined before WWII when those people associated with Fabianism started to see the light. I think it was HG Wells. The Fabians are fundamentally anti-democratic and charge that the average Joe on the street doesn’t deserve emancipation because he is not educated enough in world matters. I however trust the average Australian Joe’s b/s meter far more than a crude bastardised elite and even the average US Joe’s meter once they get past a USA Today level of knowledge. Anyway the Rockefeller / CFR lobby’s use of Liberal Facism and the… Read more »
Ross
Guest
Ned, I don’t have much to add on North Korea. They do act rationally and have been double crossed too many times making them even more dangerous. Hopefully they will keep screening episodes of MASH in the US. Most of the interest should centre on the high risk U turn taken by the South Koreans that reignited most of what we now see. I’m not convinced of the popular mandate in this respect. North Korea is an insular state and maybe there is this great belief about in the potential of a Berlin Wall crumbling effect. I think however you… Read more »
Greg Atkinson
Guest

Ross…yes I knew you were referring to his field days in the Army in the late 1890’s. What I was hinting at was chemical weapons has been used long before then.

Dan
Guest

Ross, keep posting. You’re right on the money.

Dan
Guest

Iranians with nukes, so buy gold? Why? Because peace might break out? Nobody is going to attack a country that _really_ has nukes because that would be suicide. If it ever happens, North Korea will be first.

Greg Atkinson
Guest

To be honest I cannot recall what the West are annoyed at the Iranians for in the first place. Is it because they never filled out their application form correctly to have a nuclear reactor? If that is the case I do not recall India or Pakistan filling out an application form to have nuclear weapons either.

Ned S
Guest
About as far back as I can personally remember is that the Americans were backing Saddan Hussein to overthrow the nasty Soviet backed(?) Iranians who’d turfed out America’s good mate the Shah of Persia or some such??? – Some of this stuff gets pretty convoluted as the major powers’ national interests (re oil?) are seen to be better served by backing different horses over time I suspect. And the Yanks seem to have gotten some sort of joy from making the Russian Bear squirm – Even in very recent times – Missiles in Poland and let’s support the Georgians? But… Read more »
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