October 19, 2014

REGIME CHANGE BY OTHER MEANS:

Low oil price means high anxiety for Opec as US flexes its muscles (Terry Macalister, 10/18/14, The Observer)

The US, the world's biggest oil consumer, has relied in the past on Saudi to keep Opec price rises relatively low. But now it has the complicating factor of protecting its own huge shale industry.

Even US oil producers see the political benefits of abundant shale resources and the resultant downward pressure on prices. Rex Tillerson, chief executive of Exxon Mobil, the biggest US oil company, said recently that his country had now entered a "new era of energy abundance" - meaning it is no longer dependent on the politically unstable Middle East.

So there will be understandable tension next month when the ruling Opec body meets in Vienna and its member states fight over what to do. The cartel would like to reassert its authority over oil prices but some producing countries, such as Saudi, can withstand lower crude values for much longer than others, and the relative costs of production vary wildly between nations.

Since the Arab spring, many countries in the Middle East have hugely increased their public spending in response to growing dissent over unemployment and high prices. A lower oil price endangers this.

The best strategy for the free world to use against the authoritarian petro states is to keep the prices low while reducing consumption, which is done with gas taxes.

Posted by at October 19, 2014 7:38 AM
  

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