The Iran Nuclear Deal means Iran gets relief from economic sanctions in return for limiting its nuclear activities and opening itself up to inspections. As a result, Iran can now export its goods, including oil. But what does it mean for Permian Basin Oil?
It is not a done deal yet. But if it goes through, Iranian exports could cause lower oil prices. West Texas operators say this will have a negative impact on their industry.
“U.S. produced oil that provides jobs and pays taxes can’t go on the global market, yet a sponsor, a known sponsor of terrorism can export their crude with our blessing,” said Steve Pruett, President & CEO of Elevation Resources.
Iran will have to show compliance to the deal over time, which means most of the effects of the effects will likely be seen on the long term.
“Iran had shut in a lot of its production,” Pruett said. “They can’t just open a valve and turn it back on overnight.”
But some of the effects could be seen fairly quickly after the deal is finalized.
“The immediate impact on the global market which will affect the Permian Basin is there is about 20 million barrels of oil owned by Iran floating in supertankers and another 20,000 barrels of condensate,” Pruett said.
That oil hitting the market could be what brings the prices down.
“We were hoping for $60 oil in 2016, we saw $60 oil in May. We’re back into the low $50’s but I don’t expect a recovery until 2017,” Pruett said.
A solution to this, according to Ben Shepperd with the Permian Basin Petroleum Association could be lifting the ban on U.S. crude exports.
“We must lift the ban on crude oil exports and give our allies around the world a safe, reliable source of petroleum from the United States, not just additional supplies from unstable countries like Iran,” Shepperd said in a statement.
The hope for exporting U.S. crude now lies on different versions of the same bill in the house and senate that would lift the 40-year ban.