US and Iranian diplomats have come to some semblance of an agreement regarding Iran’s nuclear program, a deal that President Obama regards as “historic.” This decision comes after nearly a decade of unproductive discussions and procrastination rivaling your current case of senioritis.
What’s the Deal?
First, some background.
Iran has been trying to develop their nuclear program for years, which they claim is for peaceful purposes only. The US, EU and UN’s response: “sick joke.” All parties involved have anxiety that any nuclear wiggle room will result in the construction of an Iranian nuclear weapon.
Israel is one of the most anxious, due to two countries’ longstanding hostility towards each other. The relationship between the two is complex, as Iran also has a history of supporting various terrorist organizations, such as Hezbollah and Hamas, which have outwardly supported the destruction of Israel. Also noteworthy: Iran’s passive aggressive Twitter pledge to “eliminate” Israel in November of 2014.
Israeli Prime Minister Benjamin Netanyahu claims that the nuclear agreement could “threaten the survival of Israel.”
The US, who traditionally sides with Israel on international matters, is hitting Iran where it hurts—by banning other countries from importing Iranian oil (Iran’s main export).
A Much-Needed Nuclear Framework
Talks regarding Iran’s nuclear strategy have been in the works since 2013. The US, Germany, U.K., France, China and Russia came to a temporary agreement with Iran in November of 2013, but the time has come for a more lasting solution.
After two years of discussion and two weeks of scrambling, a framework deal was finally reached between the seven countries last Thursday, April 2. Secretary of State John Kerry and Iranian Foreign Minister Mohammad Javad Zarif announced the agreement, which essentially requires Iran to downsize their nuclear program in exchange for eased economic sanctions on our end.
President Obama insists that the deal “cuts off every pathway” for Iran to develop a nuclear weapon and “establishes the most intrusive inspection system in history,” according to the New York Times.
The citizens of Iran were pleased with the agreement as well. The streets of Tehran reportedly filled with cheering upon Kerry’s announcement, rejoicing in the idea of eased oil and financial sanctions pending the finalized agreement. According to the International Monetary Foundation, Iran’s oil and natural gas revenues “dropped to $56 billion in the 2013 – 2014 fiscal year, down from about $118 billion in the 2011 – 2012 fiscal year.” Their economy could desperately use a boost.
Eased sanctions in Iran could have an interesting effect on the global oil economy. With 2015 oil prices already taking us back to the 1990s, allowing Iran back in the ring could drive down prices even further. Although a relief for your wallet, plummeting oil prices may not be all good news. With the oil economy already oversaturated, Iran’s oil exports could continue to exasperate an already strained market.
As the International Business Times reports, the world’s oil market “already has a daily excess of nearly 2 million barrels of oil as a result of surging US shale oil production and tepid global demand.” This oversupply has lowered gas prices by nearly 50 percent since June 2014.
Pending eased sanctions, Iran’s nearly 20 million barrels-in-waiting could further drive oil prices down to as little as $10 to $20 a barrel, according to Capital Economics economist Thomas Pugh.
As GenFKD Outreach Coordinator Mike Gorman points out, this could harm the US oil economy: “There’s still a good deal of smaller US producers who can’t compete if the price per barrel drops any lower [than it was in December of 2014].” Basically, the introduction of even more OPEC oil could drive even more US oil producers out of business, landing US consumers with sky-high oil prices once again.
What do you think of the global oil crisis? Share your thoughts below or join the discussion on Facebook.