Sunday May 20, 2012

I've Been Thinking:

Iran passed their 2013 budget. It is equivalent to a whopping $462 billion.

This new budget is a reduction of 9% from the 2012 allocation. Iran is tightening its belt. Next year will be more difficult for them, especially if the cost of oil drops and the Iranians know that full well.

If, however, the cost of oil stays at $100/ barrel Iran will more than likely have more than enough to cover the budget.

That is what happened in the last quarter of 2011. The sanctions began to work and more and more countries began applying pressure on Iran. Just as the Western world began to believe that there was a chance that serious pressure could be brought upon the Iranians - the price of oil increased and so did Iran's profits.

Just this week Iraq overtook Iran as the second largest oil exporter in the region. And the price of oil per barrel has continued to drop and remains below $100.

These are signs that we must monitor closely.

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