Posted by
Dawnsblood on Friday, January 19, 2007 5:09:18 PM
The price of oil is steadily going down and that is a good thing. Most people see this as one of those things that happens from time to time. Only one nation can make this happen, especially this quickly: Saudi Arabia. The Saudis aren't doing this for us in the western world though. It is
totally for their own benefit and Iran's detriment.
Only one actor has the
ability to substantially influence oil prices at the margin: Saudi
Arabia. The reason is simple. Only Saudi Arabia has substantial unused
production capacity. Because it can raise or lower its own production
by roughly 3 million barrels a day, Saudi has an oil weapon to use. The
major use for the weapon has been to enforce some discipline on OPEC.
Saudi does not want sustained high prices (above $50-60 a barrel,
roughly) because at that level it becomes economical to develop tar
sands, oil shale, and other substitutes. It wants the maximum price
that prevents development of new resources outside of its control.
Commentators
are beginning to notice that Saudi is pushing prices down, and the
reason seems to be more than economic. Iran needs every penny it can
get from oil. High prices have funded the mullahs' nuclear development
plan, and helped keep a lid on civil discontent.