Washington – Crude-oil prices have dropped more than 25 percent from their summer peak of $78.40 a barrel, a development that’s welcome news for American consumers.
But a continuing decline could spell trouble for oil-producing countries, especially for Iran and Venezuela, which have used their oil wealth to stick a finger in the eye of U.S. foreign policy.
Experts say crude prices would have to drop much further before Iran and Venezuela would begin to face difficult budget choices. The two countries have set aside huge foreign-currency reserves in recent years, thanks to high oil prices. Venezuela has $15 billion in savings, and Iran has amassed reserves estimated at $50 billion.
“The price of oil would have to fall really a long way to really cut seriously into their budgeting plans,” said Gary Sick, who was a national security staffer for Presidents Ford, Carter and Reagan and is now an Iran expert at Columbia University in New York.
Still, with oil prices seemingly on the decline, critics of the two countries’ leaders are beginning to contemplate what kind of trouble the countries might face should oil prices drop below $50 a barrel, or, in the extreme, reach the levels of three years ago, when prices were less than $30 a barrel. Oil prices have been hovering just under $60 on the New York Mercantile Exchange.
Both Venezuela’s Hugo Chavez and Iran’s Mahmoud Ahmadinejad have used their countries’ burgeoning oil revenues to expand populist public spending programs and government salaries.
“The worsening of the economic situation may not change the government’s behavior, but it certainly is going to change the structure and prosperity of the Iranian economy,” said Jahangir Amuzegar, who was Iran’s finance minister during the regime of the shah.
