New forces fraying U.S.-Saudi oil ties

Surging prices, along with a weak dollar and an oil-thirsty Asia, have blunted America’s leverage with the key oil producer and helped sour the two nations’ relationship.

WASHINGTON — For decades, Saudi Arabia worked with its dominant customer, the United States, to keep world oil markets stable and advance common political goals.

But the surging price of oil, which soared more than $10 a barrel Friday to a record-high $138.54, has made it plain that those days are over. New forces, including a weak dollar and an oil-thirsty Asia, have blunted the United States’ leverage and helped sour the two countries’ relationship.

As gasoline prices have risen, the White House has unsuccessfully exhorted the Saudis to step up production, and Congress has threatened retaliation. But the situation now is a far cry from the days when the U.S. economy dominated the direction of the petroleum market.

“That gave us leverage,” said Greg Priddy, an oil analyst at the Eurasia Group, a New York-based risk assessment firm. “There’s certainly a perception that the power equation has changed.”

The weakening of the economic relationship comes when the vital U.S.-Saudi security relationship also has been fraying.

Los Angeles Times