Saudi Arabia’s oil war against Iran and Russia

This week, oil fell through the price floor of $60 a barrel and gas at my local filling station was $2.26 a gallon.

That’s great news for commuters and almost every business, but wonderfully bad news for our ugliest enemies.

This price plunge has been driven by Saudi Arabia, OPEC’s dominant power. While it’s true that part of Riyadh’s actions respond to the energy renaissance in North America, the greater motivation is breaking Iran’s will.

The Saudis believe they can no longer rely on the US to contain Tehran’s imminent nuclear threat, so they’re out to do what our lukewarm sanctions couldn’t.

There’s no love lost between the Saudis and the Russians, either. The Saudis want the Assad regime in Syria to go. Moscow props it up.

I do believe that Obama could convince the Saudis that punishing Iran would be in their interest, yes. The Saudis would have to make a calculation that the damage to themselves would be worth it. When they determined not to decrease production, it was reported that the Venezuelan representative stormed out in a rage. Obviously, Obama would not couch anything in terms of his image. That would be a secondary benefit. Why do you express surprise at the scenario?

Well, what’s rarely mentioned is that Saudi Arabia has been on a massive military buildup for some years now. Plus, they would surely signal Israel “now is the time”. Syria is engulfed in it’s civil war, and Russia’s Black Sea fleet is easily disposed of (even the Italians could do it easily.) Unless Putey Pute is inclined to toss nukes around, he’ll lose.

That is a “side benefit” for Saudi Arabia, but even that side benefit won’t make any difference for shale oil. They’ll pick right back up again, as the price climbs up and some shale oil will be okay at $40 a barrel from what I read.

The real damage is to Iran, and I’m cheering Saudi Arabia on ... :-) ...

Spot on. I remember very well what Reagan and the Saudis did in the '80s to bankrupt the Soviets - though it only became clear in hindsight. It cut off their hard currency at the knees, while Reagan's defense build-up took all of their excess capacity and funds away from energy projects and other economy-improving projects. We sold, at a large profit, lots of military equipment to them, and got a giant tax cut for everyone using gas or diesel. Didn't work out too well for the oil patch, though. Lots of bankruptcies, lots of wells capped for good, not a great long-term thing for our energy independence...but technology and capitalism have rescued us.

I'd like to see oil level off around $50-$55/bbl., with gas in the $1.80/gal. range. Yeah, I'd love to pay a buck a gallon, but I don't want to see the shale revolution put up against a wall and shot. The cheaper energy prices will help virtually everyone, will kill Iran, Russia and Venezuela, and shale exploration and extraction will continue. Our energy independence might be postponed for a couple of years, but nothing quite so fatal as what happened in the mid-80s (with $8/bbl. oil at one point).

Also could be due to the petroleum derivatives market combined with a long period of quarterly greater production than consumption.

Apparently there is no viable theory on the financial derivative petroleum markets vs. the real physical transfer markets effects on driving price at the pump.

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