The coming U.S.-Saudi fight over "energy independence"

Are the United States and Saudi Arabia on the verge of serious tensions? They might be

Despite serious recent Saudi efforts to diversify its economy away from dependence on crude oil exports, the certainty that large-scale use of hydrocarbon alternatives remains years away, and conservative budgeting that ensures the Saudis are hurt less than most energy exporters by lower prices, the Saudis fear that substantial U.S. investment in ideas like plug-in hybrids and electric vehicles could undermine demand growth in oil, which they had assumed would remain strong, at least in the developing world. The fear is that if they continue investing in oil production capacity, they could end up overshooting demand.

What tools do the Saudis have to show their displeasure? They could delay near-term increases in oil production that will complicate the U.S. path out of recession. The prospect of OPEC inaction in the face of rising prices will drive anxiety in Washington, where an aggressively expansionary monetary policy adopted to shock the economy back to life — including large purchases of treasury securities — already threatens to create strong inflationary pressures during the recovery. In the longer term, they could hold back on planned upstream investments — though this would not include the current round of expansions that will bring Saudi capacity to 12.5 million barrels per day (bpd) by the end of 2009.

Foreign Policy