November 11, 2014

IN THE UNICORN'S SEAT:

Falling Oil Prices Strengthen Obama's Hand Globally (GERALD F. SEIB, 11/11/14, WSJ)

[M]r. Obama will be having talks with fellow world leaders about the problems that doubtless do the most to keep him up at night: Iranian behavior, Russian misbehavior, the threat from Islamic State militants and the overall sluggishness of the economy.

On each front, low oil prices--they have dropped to about $82 a barrel from about $110 in midsummer-strengthen the president's hand. Better yet for Mr. Obama, the perception, and to some extent the reality, is that the oil-shale boom in the U.S. has helped create the global surge in oil supplies that is driving down prices, creating a sense that the U.S. is for once in control of the energy dynamic.

To see the consequences, start with Islamic State militants. As they have gobbled up land in Syria and Iraq, Islamic State leaders increasingly have been financing their operations by smuggling out and selling crude oil stolen from Syrian refineries.

But the value of that asset is plunging, and that fact, combined with Turkey's growing willingness to clamp down on the flow of black-market Islamic State oil across its border, appears to be pinching the Islamic State's wartime budget. Reports form the region indicate that the pay the group is offering foreign fighters has fallen accordingly, which should help lessen the appeal to adventurers looking to join the fighting.

The biggest loser may be Russian President Vladimir Putin, whose recent expansionist tendencies--and his willingness to shrug off international economic sanctions imposed over his interference in Ukraine--are fueled by sales of oil and gas. The price slump figures to make much more dramatic the economic strains already created by those sanctions.


The case for gas taxes is compelling.


Posted by at November 11, 2014 2:10 PM
  

blog comments powered by Disqus
« RETURNING TO PRE-DEPRESSION NORMS: | Main | AT LEAST THE HOAX LASTED THROUGH ELECTION DAY!: »