One way the Iran nuclear deal could benefit Israel

"Oil is already selling cheaply, and the introduction of new Iranian oil is expected to push the price further down."

July 17, 2015 03:21
1 minute read.

OIL DERRICKS.. (photo credit: REUTERS)


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The nuclear deal signed between world powers and Iran this week was greeted with skepticism and denunciations from Israel, where it is almost universally seen as a strategic threat. But there is one area where even Israel may benefit from the deal: the price of oil.

Since the major sanctions were imposed on Iran’s economy, specifically its oil exports and the means of financing them, its oil exports have roughly halved, according to the Economist Intelligence Unit. By next year, it estimates, Iran will put another 700,000 barrels of oil per day back on the global market. Others have put the estimate closer to a million.

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Even as it takes time to ramp up its production and await the final sanctions to lift, Iran is reportedly sitting on 30 million barrels of extracted oil that it’s been waiting to sell.

At a time when oil producers are already producing roughly 2 million more barrels of oil than the market needs, that could mean a serious drop in oil prices.

The introduction of Iranian oil could lead to a 13 percent drop in Brent crude, according to May estimates cited in Oil and Gas Investor.

Oil is already selling cheaply, and the introduction of new Iranian oil is expected to push the price further down or, at least, keep it from rising again in the near future.

Because the oil market is a global one, that will mean cheaper gasoline prices for Israelis, and cheaper fuel for Israeli factories that have not yet converted to natural gas.

Speaking of natural gas, in May, Infrastructure Minister Yuval Steinitz noted that Iran’s gas reserves, which are 40 times larger than Israel’s, would attract investors should sanctions be lifted.

That could be bad news for Israel as it hopes to continue developing its own gas fields.

Finally, lower oil prices also put pressure on alternative fuels, a sector that Israel has been pushing in recent years. That could spell trouble for Israeli clean energy companies; it’s harder to convince customers to adopt green high-tech solutions for saving energy when oil-based energy comes cheaply.

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