Business | Oil & Gas
Iran plans budget based on $45
Iran's government and a parliament committee have an initial agreement to base next year's budget on an oil price of $45 (Dh165.3) a barrel, lower than previously suggested as crude prices have tumbled, a newspaper said on Tuesday.
- Agencies
- Published: 23:25 December 2, 2008
Tehran: Iran's government and a parliament committee have an initial agreement to base next year's budget on an oil price of $45 (Dh165.3) a barrel, lower than previously suggested as crude prices have tumbled, a newspaper said on Tuesday.
But one senior lawmaker in Iran, the world's fourth largest oil producer which depends heavily on oil revenues, said even a figure of $45 was too high and no more than $35 would be more realistic for the 2009-10 budget, the daily Poul reported.
Economists say Iran's government, which has enjoyed windfall oil earnings in recent years, would likely have to cut spending next year when President Mahmoud Ahmadinejad is expected to run for re-election, unless crude prices rebound to $80 or so.
Benchmark US crude has tumbled by about two-thirds since a July peak, trading below $48 a barrel yesterday as demand from big Western consumers has shrunk amid a world econ-omic slowdown. Iranian oil tends to trade a few dollars below US crude.
"Based on views proposed in the last committee meeting, members of the committee and government representatives reached preliminary agreement to base the budget on an oil price of $45 (a barrel)," Hassan Vanaie, a member of parliament's planning and budget committee, said, according to Poul.
Previous figures
A government official said in October Iran was planning for an oil price of $55 to $60 in the 2009-10 budget that starts in March, but oil prices have continued to slide since then.
The oil price set for Iran's budget indicates government expectations but does not give a full picture.
Economists said last year's budget was officially based on a price of about $40 a barrel but, when withdrawals from an oil revenue reserve fund and other crude-related earnings were taken into account, the state needed $70 or more to balance its books.
Economists say in 2009-10 the oil reserve fund, called the Oil Stabilisation Fund, will have less cash to tap.
That will likely mean investment in projects that have been a centrepiece of Ahmadinejad's pledge to spread wealth to the poor could face cutbacks. This will not be welcome news ahead of the 2009 June presidential election, analysts say.
The budget runs from March each year.
Hamidreza Katouzian, head of parliament's energy committee, said the government should prepare for much lower prices than previously expected because of rapidly falling world oil demand.
"My personal view is that the (2009-10) budget should not be based on more than $35 (a barrel) but many lawmakers believe this figure can be between $30 and $40," he said, according to Poul.
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