The American Interest
Analysis by Walter Russell Mead & Staff
Iran Oil Production Down; World Oil Supply Up

Some relief for motorists could be on the way, at least according to the latest report from the International Energy Agency (IEA). Despite fears that sanctions against Iran would suffocate global oil production, the IEA said global oil inventories increased by up to 1.2 million barrels a day in the first quarter of 2012. Most of that increase is attributed to Saudi Arabia, which upped its supply to assuage concerns over lost production from Iran, as well as Iraq and Libya, which continue to resume normal output.

In a further piece of good news for the Obama Administration’s Iran policy, the IEA reported that Iran’s oil production decreased nearly 10 percent compared to the same period in 2011. Although Iran’s oil industry has suffered from decades of underinvestment, due mostly to its inability to entice the necessary international capital and expertise, the Wall Street Journal said the drastic decline is a result of sanctions:

Iran’s oil production is in long-term decline, but the reduction seen by the IEA last quarter was almost 20 times larger than the average year-on-year decrease in the same period in 2011 and 2010, suggesting that sanctions are having a marked effect on the country’s ability to sell oil.

Not only is this good news for President Obama on the domestic front, since it reduces the likelihood of a further surge in oil prices in the lead-up to the election; it also provides some breathing room for his Iran policy. If the decline in Iran’s oil production continues to have little or no impact on world oil prices, the sanctions regime will be easier to maintain, strengthening America’s hand in negotiations with Teheran, which is beginning to have doubts of its own about holding the line on nuclear development.

Published on April 13, 2012 9:00 am
  • Anthony

    “Not only is this good news for President Obama on the domestic front….” How does it affect the Iranian people caught in the middle?

  • Anthony

    “Chinese shipyards are expected to deliver the first of 12 supertankers to Iranian oil shipping operator NITC in May…” It appears Game of Thrones continue with many pawns in middle.

  • Jacksonian Libertarian

    Sanctions have never worked on an Authoritarian Government, what has changed that makes you think they will work this time? You can boil a frog alive if you put it in a pan of water and heat the water very slowly. It’s been over a decade that the sanctions have been getting slowly implemented, and the Iranians have barely noticed their slowly declining standard of living.