Negotiations over Iranian oil production falls through!

With oil prices still at a low,producing countries are desperate to stop the excessive flow, while at the same time protecting their assets. The Iranian government is a chief rival of many other oil producers, mainly Saudi Arabia. This article brings to light some of the complex economic relationship oil has to Middle Eastern states, the Saudi government’s income is mainly based on their oil exports (which they can do much cheaper than many other countries.) Unfortunately for the Saudi’s the Iranian government is unwilling to slow down their production as their industry is attempting to return to pre sanction output levels. The low oil prices hurt oil producing Middle Eastern states and so it is in their best interest to focus on increasing the price per barrel of oil. The easiest way to do this is to move the supply curve leftward by decreasing the amount of oil in the market. Unfortunely oil is such an important export that these countries are unwilling to sacrifice enough production to slow oils falling price. From 2014 to 2015 oil fell almost 30 dollars per barrel in an unprecedented fall. Only time will tell if these country’s will be able to slow oils free fall.

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