Thomko Petro Chemical Blog

What's going on with the Iranian Oil Bourse? March 20th has come and gone, and there's little word on the proposed oil bourse.

Well, there's one thing for sure, Iran has wanted, and still wants to create an oil bourse, and instead of pricing oil in Dollars, oil would be priced in Euro's. So, what happened?

Iran has a public relations problem - with its neighbors in the region, and the international community.

With the current high oil prices, Iran's position has continued to be firm against the international call to look into its proposed nuclear program.

Any disruption in Iranian oil production would be a disaster in this current market, since Iran has the second largest reserves after Saudi Arabia. And let's not forget about the shutdown in Nigerian oil - which only adds to the nervousness of the oil market (Nigeria is the fifth largest supplier to the US). To top it off, US stock piles of gasoline and diesel fuel are lower than expected.

So, Iran can threaten to decrease production, which would obviously benefit their economy with higher oil prices.  

Iran has the second largest economy in the region in Gross Domestic Product (GDP), and the third largest population behind Saudi Arabia and Egypt. The talk of international sanctions against Iran could end up adversely affecting Saudi Arabia, along with our friends in Dubai. So, things are not as simple as they appear.

Now back to relations in the region . . .  

The New York Mercantile Exchange, Inc. (NYMEX), is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals.

And NYMEX has gone into a joint venture, and is planning to open an oil exchange in Dubai later this year, and the new exchange will be called The Dubai Mercantile Exchange (DME), and oil will be priced in dollars.

Here's what the Dubai Mercantile Exchange Website says . . .
The DME will be developed upon the direct instruction of His Highness General Sheikh Mohammed Bin Rashid Al Maktoum, Crown Prince of Dubai. It is expected that the DME will initially trade sour crude and fuel oil on a transparent platform for price discovery. DME is part of a larger government initiative to make Dubai a premiere financial and trading hub. For decades, Dubai has played a vital role in trading commodities. By leveraging Dubai 's existing infrastructure, DME can serve the greater need of the Middle East energy markets.

After the proposed date came and went, many are saying it was all a hoax, and the US dollar is and will always be safe. Since I personally have a stake in the American dollar staying afloat, I would like to believe them. And I'd feel a lot better if the Fed wasn't trying to hide the MP3 report, and playing around with the stock market - and don't let anyone tell you that's not true. 

However, this new exchange only keeps the same old problem at hand - our dependency on oil.

We all are aware of the perilous situation we are in being dependent on Middle East oil, and if you have read our many posts on Venezuela, it's obvious Chavez would love to stick it to America.

Our last post is about Iran becoming a giant in the petrochemical industry, and petrochemicals are made from petroleum. It's not a great leap to start selling petrochemicals and move to petroleum. And whether Americans want to believe it or not, there are plenty investors who would love to hedge their money against the depressed US dollar.

I will be surprised if the Middle East goes along with sanctions against Iran, since it would impact them economically. And even if relations with Iran and its neighbors are strained, it remains to be seen whether the "strained relations" with its neighbors will stand an attack on Iran - if it comes to that.  

The discussion is far from over!