How Iran’s Ramp-Up of Natural Gas Production Will Impact Petroleum Prices and Other Realities

Petroleum prices remain low, and not just because of a surplus of oil and related fuels. In fact, pressures of other kinds have helped keep petroleum prices lower in recent years than they might historically have been. From renewable sources like solar and wind power to nuclear plants slated to come online, petroleum pricing has been feeling pressure from a number of quarters.

Probably most significant of all, however, has been an increased focus on natural gas production worldwide. While the world still lacks most of the expensive natural gas terminals that could help make the resource a truly global fuel, production activities in many places have been exerting plenty of regional influence. Whether it happens in Russia or the United States and Canada, more natural gas production, and the pricing it implies, tends to soften demand for petroleum in the bargain.

This is part of why so much attention has been paid in recent years to Iran’s expressed desire to becoming more actively involved with natural gas production of its own. The sanctions that kept so much Iranian petroleum off world markets for years since have been lifted, meaning that country has once again assumed a place of great prominence in the calculations analysts make to assess the fossil fuels markets. With a renewed dedication to adding natural gas production to its arsenal of tools, Iran will likely become an even more influential player in the near future.

Just how and where that impact will be felt remains up in the air, but some clues are obvious. One analyst has pointed out, for example, how the generally regional nature of the natural gas production and distribution industry will mean that Russian producers will likely feel the effects of Iran’s proposed activity most keenly. For those interested, his comment is here, and it delves into the issue in a way that reflects a real understanding of the relevant markets. While increased Iranian production of natural gas will help keep a damper on petroleum prices, it will likely mean even more pointed things for those who pursue their own extraction activities in places where the output will compete on the same regional markets.

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