Sunday, May 14, 2006

Iran's oil exchange to trade oil for euros, not dollars

On the 5th of May Iran registered its Oil Exchange, which will become the fifth Stock Exchange of its kind in the world. Other exchanges operate in New York, London, Singapore and Tokyo. Which exact companies will be allowed to trade at this Exchange is, like the official opening, still unknown. Yet the Iranian Exchange will be unique, as all trading will be conducted in Euros. On the already functioning Stock Exchanges business is conducted in dollars and, because of this, the specific term ‘petrodollars’ came into use. If the Iranian Petroleum Exchange allows the major oil companies to trade on its floor then the dollar seriously risks losing its position in the world market. This is a possibility that many experts already consider very plausible.

Will the situation change on the World Oil Market? How will the opening of the Oil Exchange affect the rate of the dollar? READ MORE

The present happenings in the Oil Market are already well known – the price of oil will continue to grow. But what changes will occur with the creation of the new Exchange? From now on will all the oil have to be purchased from the Iranian Exchange? With the opening of the new exchange neither the price of milk will rise nor will it decrease in quantity. This is a fully political gesture on the part of Iran.

As concerns the introduction of trading with the euro, this corresponds perfectly with the present direction of the world economy: the dollar falls and the euro gets stronger.

If we compare the presumed turnover of the Iranian Exchange and the full turnover of the economy of the USA we will see that the same mistakes are still being made. The dollar will continue to fall while the price continues to grow on oil. The growth will continue as long as American pursues its present political agenda. The USA of course has its dividends - to raise the competitiveness of its own goods.

Iran declares that with the opening of the Exchange it hopes to reduce the influence of America on its own economy and the economy of the region. But can it achieve this?

At present the USA has practically no influence on Iran and its economy. In turn Iran does not have the potential to influence USA politics. Therefore, from the Iranian perspective, they are prepared to make their different political declarations and gestures. The end, however, is easy to miscalculate. It could lead to the liquidation of Iran’s atomic aspirations.

So the creation of this new Exchange, the games of Iran, in which they continue to play, will carry on until Uncle Sam decides to put his foot down, for when he does, the games will soon come to an end.

Will Iran gain any profit from the opening of the new Oil Exchange?

Undoubtedly Iran has the potential for economic profit. Yet the creation of the Exchange will, however, not play a defining role in the in the Iranian economy, with or without the euro Iran has its own political agenda and economic motives have, for a long time, not played a very important role. One main concern is that Iran is governed, not only by political motives, but by deeply rooted religious ones as well.

Russia has now to adjust its focus of attention from the economic area to the political. By this I mean her new political energy agenda.

What’s more, these new events will, in no way, have an affect on the world’s economic direction. Just as the prices on oil and gas have grown, so they will continue to grow.

How long will the rise in energy prices continue?

This will eventually lead towards a crisis that will hit the economy of the oil producing countries. To begin with, I think, it will quickly strike the developing countries such as China and India, followed later by Europe and the USA.

At this very moment we are seeing the same crisis, only in a slower from, that already occurred when the Arabian countries established an embargo. Now it is just on a larger scale, though, in reality, it is the same thing.

The point is not that the ‘world does not have sufficient oil’ for this simply isn’t true. World supplies of oil will last us yet many more years, but for the West there exists the problem of Iran, problems of the new Latin American countries, terrorism from the East, Russia, and the constant concerns of energy which still leave the West feeling very insecure. And all these problems are coming from the very countries that provide the west with its energy.

The price, therefore, continues to rise but in reality a barrel of oil is still sold at a cheap price.

However, the desire to reduce the consumption of oil in order to find different sources of energy does still not exist, despite the fact that these alternatives are now ready for development. The problem of thermal reactors is still being dealt with very ineffectively, while the use of other forms of energy are inexhaustible, and could help solve the present energy problem. In theory this is a task that will be decided in the next century.

There is, of course, the possibility to use hydrate methane, another powerful source of energy, and, if it were developed and used effectively, would provide the same amount of energy reserves as oil and gas combined.

So in fact there are solutions to the present day problems, only there is not the political desire to realize them.

And when the political situation reaches its peak, when Iran and Saudi Arabia decide to shut off the supply to the west, then it will be the west that will have to find and develop these alternative fuel sources.