November 3, 2007

TWELVISM ISN'T WORKING:

Why Is Iran Importing Gasoline?: Other oil-rich nations don't have to (Lee Hudson Teslik, Nov. 2, 2007, Slate)

The country's aging and inefficient refineries can't meet its swelling demand for gasoline. Iran may be brimming with crude oil, but it can't convert enough of the raw product into refined fuels like diesel, kerosene, or gasoline. International sanctions and political pressure from the United States and other countries have discouraged multinational energy companies from making large-scale investments in Iran's infrastructure. Meanwhile, Iranian domestic energy policy—including heavy subsidies for gasoline—has encouraged waste and increased domestic demand.

Refineries don't come cheap: In the United States, it can cost billions of dollars to set up a brand-new facility. Iran might be able to put one together for less, given its more relaxed environmental regulations. But the Iranians would still need to make a huge investment to offset their high demand for gasoline and reduce the need for imports. Other countries draw development money from energy companies in exchange for market access. But many companies have shied away from making such deals with Iran. They face direct sanctions from the United States and United Nations, as well as political pressure discouraging involvement. More generally, Iran is known for a restrictive, bureaucratic business environment that can scare off investment.

Demand for gasoline is artificially high in Iran, due in part to domestic subsidies. The government has for years used the profits from oil exports to provide gasoline to its people for as little as 12 cents per gallon—less than one-third of what it costs to make it. The subsidized gas prices led to increased dependency on automobiles, and consumption increased by more than 10 percent per year in the early 2000s.

Posted by Orrin Judd at November 3, 2007 11:54 AM
Comments

The USA imports gasoline refined in Saudi Arabia just like Iran does. Thanks to the Clean Air Act the last refinery was built in 1976. There won't be any more.

No doubt the environmentalists get nice warm fuzzies thinking about the additional money we are sending to the Wahabbis.

Posted by: Gideon at November 3, 2007 1:14 PM
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