December 28, 2006

ROGER STERN looks at Iran’s oil crisis. That’s a link to Stern’s paper. Here’s a news story on his findings. Excerpt:

Iran’s oil exports are plummeting at 10pc a year on lack of investment and could be exhausted within a decade, depriving the world economy of its second-biggest source of crude supplies.

A report by the US National Academy of Sciences said rickety infrastructure dating back to the era of the Shah had crippled output, while local fuel use was rising at 6pc a year.

“Their domestic demand is growing at the highest rate of any country in the world,” said Prof Roger Stern, an Iran expert at Johns Hopkins University, Baltimore.

“They need to invest $2.5bn (£1.28bn) a year just to stand still and they’re not doing it because it’s politically easier to spend the money on social welfare and the army than to wait four to six years for a return on investment,” he said.

“They’ve been running down the industry like this for 20 years.”

Prof Stern said Teheran faces impending disaster since it relies on oil revenues for 70pc of its budget.

Perhaps this explains the Bush Administration’s otherwise-inexplicable malaise with regard to Iran. We talked to Stern, and to energy expert Lynne Kiesling, in this podcast. But read this for a shorter-term worry.