Saudis can’t save us

Beseeching oil sheiks to open their spigots and bring back cheap oil for Americans doesn’t work any more

There is only one thing I used to need to know to predict the price of oil: What was Saudi Arabia thinking?

For decades, the Saudi oil minister could declare a target price and the market would gravitate toward it. We can recall some of those targets nostalgically


Sheikh Zaki Ahmed Yamani shocked the oil world in 1984 when he declared the kingdom, which had struggled in 1983 to defend $40 oil, was initiating an oil price war and had set its sights on a $15 oil price. Armed with lots of spare crude oil productive capacity and the realization that the 1979 oil crisis was bad for long-term business, Saudi Arabia tripled its oil output, hoping competitors would cry uncle. Between the 1973 oil embargo to the upside and the 1984 price war to the downside, the kingdom showed it had the clout and the political will to change oil price trends virtually overnight.

In sum, for almost four decades, when Saudi Arabia spoke, oil speculators listened. That is why U.S. presidents, starting with Franklin Roosevelt and including most recently George W. Bush, have courted the king of Saudi Arabia on matters related to oil.

The problem is that the reality of Saudi oil power has faded and no one, not even our so-called “oil” president or the Saudis themselves, seems to have acknowledged this new fact of life.

Houston Chronicle