Iran: Crude reality :: WSJ

Some extracts:

Iran sits on one-tenth of the world's known oil supplies but is using so much energy these days it may start rationing gasoline as soon as next month.
...
As the country has grown wealthier selling oil and gas, Iranians have themselves become large consumers of energy. Government subsidies, which make energy nearly free to consumers and businesses, stoke the demand further. At the same time, a combination of Western sanctions and Iranian policies has discouraged foreign investment in oil fields, causing production to stagnate. The result: Iran's oil exports could dry up in as little as a decade, according to some who have studied the situation. That's a looming disaster for Iran, which derives about 85% of its export income from the sale of oil.
...
Once seen as little more than a giant petrol station to the world, Middle Eastern oil suppliers are now becoming some of the largest consumers of energy anywhere. They are attempting to diversify their economies, often by encouraging energy-thirsty industries such as refineries and processing of metals like aluminum. Meanwhile, record numbers of young people are growing up and establishing households. Already, the Middle East and North Africa's population of some 300 million consumes almost as much oil as 1.2 billion Chinese.

Iran, where a huge population bulge is reaching adulthood, is confronting the export crunch earlier and more acutely than others. Iran already consumes more oil than all but 15 other countries on earth, according to the International Energy Agency, which monitors the world energy market. In 1995, Iranians used the equivalent of 34% of the oil they pumped from the ground, exporting the rest. Last year they used 40%.
...
Iran will also have to keep ahead of Iranians' own thirst for gas and oil, which is growing at a double-digit pace. So far, it is losing the race.

Much of the problem is waste. A recent study by a parliamentary committee said that 18.5% of the country's electricity is lost before it even reaches consumers, due to rickety infrastructure, corruption and mismanagement.

... subsidies make energy practically free in Iran, discouraging any serious energy conservation. Gasoline, for example, costs about 40 cents a gallon at the pump. That's encouraged an explosion of use, as Iranians add new cars while continuing to use fuel-guzzling old models. It has also encouraged a brisk smuggling trade as Iranians buy millions of gallons of fuel at the subsidized price and truck them into neighboring Pakistan, Turkey, Afghanistan and Iraq for sale at market rates.

Could Weak Oil Cost Venezuela, Iran Clout? :: Wall Street Journal

Link($):

Softening oil prices over the past few months have spurred hope in Washington that less revenue for oil-rich states could weaken the hand of governments the U.S. considers worrisome -- particularly those in Iran, Venezuela and Russia.

The three nations are potentially vulnerable: Oil-and-gas revenue accounts for between two-thirds and three-quarters of government income in both Venezuela and Iran, and only slightly less in Russia. So, a big drop in oil prices would slow economic growth and hit government finances, forcing them to cut back spending increases that have boosted the popularity of all three governments at home and emboldened them abroad.

But it is far too early to expect the changing economics of oil to have big political effects. For one thing, although the price of oil has fallen 28% since hitting an all-time high of $77.03 in July, it is still high by historical standards. The three nations, having weathered crises before, have all built up substantial currency reserves to cushion against a further fall in prices.

"Fifty-dollar oil doesn't put any of them in any grave danger," says Michelle Billig, director of political risk at PIRA Energy Group, a New York-based consultancy. "After all, it was only a few years ago that we were talking about an oil windfall for these places at $30 a barrel."
...
Unlike Russia, and to a lesser extent Iran, Venezuela has been much more reckless in spending its oil windfall. Last year alone, public spending grew 43%, widening the gap between total government income and outlays to about 1.5% of the total economy, according to estimates by Morgan Stanley.

So far, falling oil prices haven't dented Mr. Chávez's spending habits. Just last week, he announced a program to send 100,000 poor Venezuelans each year to vacation in Cuba. He also recently offered the army's services to build a road in Nicaragua at a projected cost of $350 million.

While economists agree that Mr. Chávez's free-spending policies may eventually shipwreck the Venezuelan economy, they say that won't happen -- if it happens at all -- for at least another year. The main reason: Venezuela has accumulated more than $36 billion of reserves.

But there are signs Mr. Chávez could be headed for trouble, even without a much bigger drop in oil prices. He recently ordered an increase in gasoline prices -- which the government has long subsidized -- to raise federal revenue.
...
As revenue has soared with oil prices, Iran's public-sector spending has expanded almost as fast. To pay for massive subsidies for most daily goods -- including gasoline, bread and heating fuel -- the government has borrowed in each of the past two years from a special rainy-day fund set up to retain some oil revenue for when prices fall again. But that spending has ignited inflation, now running around 15%.

Iranian President Mahmoud Ahmadinejad introduced a budget early last week that included a 20% increase in spending for the Iranian fiscal year that begins in March. He said the government, whose ultimate authority is held by a council of Islamic mullahs, would be able to add to its rainy-day fund if oil prices remain above $33 per barrel, the level the budget assumes for Iranian oil. But some private economists doubt the budget calculations and predict Tehran would again fall back on those surplus funds to finance spending.