In last night’s press conference the President, in passing, suggested that it doesn’t make sense that a country like Iran, which is so rich in oil, would decide to use nuclear power for electricity generation. The President is not alone in this. This argument has been made over and over again by radio talk show hosts and political pundits. But in fact this argument does not hold economic water.
The question facing Iran or any other oil exporting country is this: is the cost of generating a BTU of electricity from nuclear power greater than or less than the price it can get in the market for the amount of oil that would be needed to generate that same BTU. In other words, the cost of generating electricity using a barrel of oil is the price that can be gotten for that oil in the market place. If that price is greater than the cost associated with generating that same amount of electricity from nuclear then it would make complete economic sense for Iran or any other country to generate its own electricity from nuclear while selling its oil in the open market. What this means is that the higher the price of oil goes in the world market place the more likely it is that we would see an oil rich country use nuclear power to generate its own electricity.
Now I don’t know what these alternative costs actually are, but to simply suggest that it is absurd for a country like Iran to use nuclear power for electricity generation without proving it with actual cost comparisons shows economic ignorance.
