This week the United States put extensive sanctions on the world’s third largest oil exporter.
This isn’t anything new. Sanctions against Iran have been in place for a while for fear Iran’s nuclear program isn’t quite the peaceful energy plan they claim it is.
In fact, in 1996 the U.S. placed sanctions on any company investing more than $40 million in the energy industry in Libya or Iran.
Libyan sanctions were lifted, but Iranian sanctions were doubled down…
The European Union installed sanctions on Iran this year.
And U.S. legislation targets the Iranian oil sector from every which way: the purchase of oil, investment in oil technology and tankers, sale of equipment, and even banks that finance the production.
Figures compiled by Bloomberg show this is costing the OPEC nation $133 million a day. And so far, oil prices are unaffected.
But the same can’t be said for outgoing supply…
Imagine taking 2.5 million barrels a day out of world exports.
That was Iran’s average exports for 2009.
Of course, the sanctions aren’t destroying Iran’s total exports — they’re just cutting them down a bit.
But again, Iran is the third largest exporter. That means plenty of nations rely on its oil.
Just look at this chart from the EIA:
It’s no wonder China is up in arms over these sanctions…
Not only will one of its banks be affected, but it also gets a healthy dose of its crude imports from Iran.
Half of Iran’s oil exports have been rocked by these sanctions.
But these sorts of sacrifices are necessary. If Iran’s nuclear projects are contributing to weapons of mass destruction, most of us are probably happy to see any measures that will help avoid a global nuclear war.
Of course, that puts the rest of the OPEC-dependent world in a tough spot.
Already, world energy demands are expected to outpace oil production.
The third largest oil exporter has lost 1.2 million barrels a day of exports. Other nations have had to increase their output in order to make up for this loss.
The shale boom has made this relatively easy for the United States, which in May doubled its average daily exports from 2008.
But this still doesn’t make up for the 1.2 million barrels lost — not to mention the 5 million additional barrels the world will need by next year…
Saudi Arabia has increased output, but it’s also increased its consumption — and the nation is still starving for energy.
And China is scrambling to secure its own oil sources. Last week Chinese company CNOOC scooped up a huge oil stake in Canada.
But none of this will really make up for that necessary loss — unless there was some way to recover all that “unrecoverable” oil…
All oil reserves contain a fair amount of crude that remains in the reserve after production because it’s too difficult (and too expensive) to extract.
Recovering that oil would be more than enough to take care of any amount of oil lost by the Iranian sanctions… and put the U.S. one step closer to energy independence from OPEC nations.
One company has perfected a technology to access billions more barrels from oil reserves — one that could relieve the strained oil markets and create huge profits.
You can see how it works here.
All roads lead to increased oil demand…
We already know where there’s more oil. All we need is help getting to it.
Good Investing,
Brianna Panzica
Analyst, Energy and Capital
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