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Oil Exporters Rely on Higher Price of Their Product

Service : Economy
TEHRAN, March 23 (ICANA) – The fiscal budget bill submitted recently to the Majlis (Parliament) by the government with delay is based on a higher oil price which has sparked off several debates.
Wednesday, March 23, 2011 8:10:09 PM
Oil Exporters Rely on Higher Price of Their Product

The oil price set in the budget for the incoming Iranian year of 1390 (begins on March 21) is 80 dollars per barrel. The huge share of the oil price in the budget has been questioned by the lawmakers and turned to a subject for scrutiny.

But can the share of oil be considerably raised in the budget bill of 1390? According to a study made by the Iranian experts within such a short time, the oil export potential of the country should increase by 40,000 barrels a day to prevent a budget deficit in the forthcoming year, reports khabaronline.ir.

It will be possible if only local rising consumption is controlled. The other issue raised by the analysts is that the increasing oil price enables the government to allocate more funds to development budget. In other words, the execution of subsidy reform plan which has led to a lower oil price empowers the government to focus more on development plans and implement them. But will in reality, not just theory the revenues out of higher oil price will turn to national capitals used for expanding development infrastructures?

If the Iranian government gives an appropriate response to this question, it not only will reduce people's anxiety over the economic outlook of the country, but will allay the concerns of the economy experts for the increasing share of oil in funding national fiscal budgets, since in this process through achieving development goals, the government will be able to transform an underground capital into the development capital.

However, neither previous governments of the Islamic Republic, nor the current government of Mahmoud Ahmadinejad have been able to fulfill the plan.

Although various administrations have been differently felt committed to objectify the plan, we finally witness that each year more share of oil revenues are spent on importing the consumer goods and running costs.

It is the same concern which leads the experts to view the rise of the oil revenues share in the fiscal budgets of the governments as a negative factor prone to criticism.

The recent crisis in the Middle East countries has caused oil price to hike up, a trend which is estimated to keep the oil price in the forthcoming year of 1390 (2011-12) above 90 dollars. Even according to some pessimistic assessments the oil price of higher than 200 dollars would not be unlikely due to increasing clashes in Libya and the possibility of the extension of crisis to Bahrain. Based on this analysis, the unrest in Bahrain may also make an impact on the Saudi Arabia's oil export, the last hope of the western countries which has the capacity to produce oil up to 3 million barrels a day more than its usual output.

Such a prospect has encouraged the governments whose main source of income is oil to be more reliant on their petroleum export. Figures show that the majority of these countries including Iran have planned their annual budget bills based on a higher oil price. According to a report issued by the researches center of Iran's Majlis, the average oil price per barrel in the fiscal budgets of 10 major oil producer countries in 2011 has been raised by 23 percent.

However it seems that among these countries, Iran and Indonesia have set a new record by arranging their new annual budget based on 80 dollars oil price a barrel, almost 17 dollars about the average rate of oil price in the budget bills of key oil exporter countries.

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