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Page added on February 7, 2016
Saudis — Stop the Oil Flood – or Else
Why has this not been done? Because too many American and British politicians are on the Saudi payroll, and too much of Britain’s and America’s arms producers are dependent on Saudi business. The Saudis’ heads have swelled with arrogance while their dim-witted oil policies threaten the global economy.
One night in his tent in Tripoli, Libya, Col. Muammar Khadafi told me, “the Saudis are a very rich family hiding behind high walls, terrified their neighbors will come and steal their wealth.”
He was right. The covetous neighbor most feared by the Saudis are Iran, followed by Egypt, Turkey and, more distantly, Israel. Iraq also used to be on the list until it was destroyed by the United States in 2003.
One must keep Saudi Arabia’s fear factor in mind to understand the oil wars that are now shaking the world’s economy to its foundations.
The Saudi royal family decided to kill two competitive birds with one stone – Iran and surging US shale oil producers – by kicking off a price war to run them out of business. Saudi Arabia is one of the world’s lowest cost oil producers. The Saudis also hoped to punish Russia for backing Syria’s government.
Price wars are the last recourse of all bad businessmen.
The problem with this ham-handed strategy is that your competitors will hang on desperately and cut prices to survive, even if it means running big losses. Price wars hurt all concerned. They dislocate production, markets, future investments and capital spending.
The result of Saudi Arabia’s oil price war has been to drive the once “black gold” down to around $32 a barrel from a high of $105 in 2015. Other Gulf producers joined Saudi Arabia in slashing prices. We have gone from panic over “peak oil” (worldwide shortages) to panic that we are drowning in oil.
So far, the Saudi oil war has indeed badly damaged the US shale and regular oil industry but has not put them out of business. However, oil industry dividends are being cut way back or eliminated. Blundering by the US, Canadian and Japanese central bankers has made things far worse.
Other major oil producers like Russia, Iran, Algeria, Malaysia, Kazakhstan and Indonesia have also been badly hurt but are hanging on. The oil war has seriously damaged the economy of the European Union. Japan should have been boosted by low oil prices but is also suffering relentless industrial decline, as witness by the humiliating sale of Sharp Electronics to China’s Foxconn.
Oil has become tightly correlated to North America’s stock markets, meaning that they rise and fall with the price of oil. Low oil prices may have helped a few industries like airlines, but they have created a worldwide recession. Canada, a dire example, has been battered by low oil prices and faces a bleak future unless resources rise sharply in price.
Efforts by OPEC and other oil producers to agree to cut back production and thus foster a price rise have so far failed due to fears that nations who reduce exports will see their former markets taken by cheating competitors. In economics, it’s known as ‘beggar they neighbors.’ The Saudis and Gulf producers keep blocking a decrease in oil production.
Now, the desert oil producers are deeply worried that Iran, freed from US economic prison, will soon begin exporting at least 500,000 bbls a day of oil. Iraqis oil production is finally returning to pre-US invasion levels. Oil prices could drop even further unless a deal is reached.
But Saudi Arabia is so petrified of Iran it is very reluctant to make a deal that will help grow the Islamic Republic’s economy – and hence even limited military power. So what’s to be done?
Some critics are saying that a group of obscenely rich Bedouins should not be allowed to hold the world economy to ransom. The western powers should press the Saudis to cut production or risk seeing vast Saudi investments in the US and Europe frozen – just as was done with Iran. The Saudis should also be told to stop their bloody war against Yemen that has killed thousands, cease their human rights abuses, and cease funding dangerous Islamic extremist movements, including ISIS and Syrian revolutionaries.
Why has this not been done? Because too many American and British politicians are on the Saudi payroll, and too much of Britain’s and America’s arms producers are dependent on Saudi business. The Saudis’ heads have swelled with arrogance while their dim-witted oil policies threaten the global economy.
The Saudis and OPEC must be offered a deal by the great powers that they can’t refuse. Otherwise, the Saudis may remain a bigger threat than ISIS.
112 Comments on "Saudis — Stop the Oil Flood – or Else"
Ian on Sun, 7th Feb 2016 6:16 pm
The failing oil industry, and the failing economies of every country mean the stock market will get worse, not better, probably for many, many years. We all see the world problems, where are the solutions? THEY ARE NOT THERE !
GregT on Sun, 7th Feb 2016 6:17 pm
.
GregT on Sun, 7th Feb 2016 6:20 pm
“We all see the world problems, where are the solutions? THEY ARE NOT THERE !”
Predicaments don’t have solutions, only uncomfortable choices.
frankiemills41 on Sun, 7th Feb 2016 6:47 pm
gawddammed people are too frikken rich any how its about time we “screw them ” out their richness more money for us poor folk don’t ‘cha agree???
FreeRadical on Sun, 7th Feb 2016 6:54 pm
The saudis are evil and they are paying for the western invasion – the peoples of the west will raze their politicians for treason and raze the saudis as the criminals they are .
Clifford Ross on Sun, 7th Feb 2016 7:00 pm
Time for The U S A to wake up and realize that Israel is our ONLY ally in the Mid East.
Boat on Sun, 7th Feb 2016 7:23 pm
Clifford,
Now what would our defense industry do without Middle East 10’s of billions. The big question is why did we put in a Shiite in Iraq when most of our buddies were Sunni.
Tom on Sun, 7th Feb 2016 7:34 pm
Israel our ally? Israel looks out for Israel and no other country. They look to the U.S. to be a defensive backstop for their harsh, stupid and provocative policies toward the Palestinians, but give no credense whatsoever to our concerns. What kind of “ally” is that?
Jason Sloan on Sun, 7th Feb 2016 7:39 pm
Wrong. U.S. officials are complicit, but not because they are tools of Saudi Arabia. The Saudis are flooding the world oil market because the U.S. has forced Saudis to do this. It doesn’t help the Saudis, they are now in a huge debt over these lower prices, and as soon as prices rise, their competition will quickly recover their fracking shale abilities, so there is no long-term benefit, and no short term benefit. This is the Saudis, as usual, taking orders from the West. Destroying U.S. oil helps the U.S. whose economy is based on consumerism (80%), only 3% of the economy is oil production.
Klace on Sun, 7th Feb 2016 7:51 pm
If you believe Isreal is an ally of the U.S.A research the USS Liberty as they and the American politicians that allowed the Israeli’s to get away with killing 30 plus American kids should be prosecuted
IllyrianWolf on Sun, 7th Feb 2016 9:20 pm
Stop spamming the internet with such a interest-bought article; there is nothing wrong with low oil price. The current oil price is just where it should be. World economic crises have been spurred by high, not low oil prices (1972, 2008)…
twilly on Sun, 7th Feb 2016 9:45 pm
Lets be clear – it is unchecked US production that has flooded the market – the Saudis are only protecting their market share just like every other nation. This is a poorly written by a complete buffoon
Boat on Sun, 7th Feb 2016 9:46 pm
Wolf,
High prices, low prices. The world will live with either. Since we deal with both, why worry.
Fish Hook on Sun, 7th Feb 2016 9:55 pm
War is a Racket. The real reason the U.S goes in bed with the Saudis is that they are the only rich country that feels so insecure they will buy any scrap from the U.S Military Industrial Complex at any price just to satisfy themselves that they can challenge Iran if and when war broke out. Unfortunately for the U.S it gets often undercut by sneaky France. Look who is reaping the trade benefits from lifting Iran Sanctions – France. Airbus is doing all the aircraft sales and Peugeot is setting up shop while the U.S is yet to strike any commercial deal. Soon, it is France that will be getting all the construction contracts in the reconstruction of Syria using funds created by world nations. Is the U.S looking very smart? May be, may be not.
WARS ARE AS STUPID AS THEY HAVE ALWAYS BEEN.
Boat on Sun, 7th Feb 2016 9:56 pm
twilly,
Oil is always checked by price/quantity of product. Oil is a global commodity. There is no blame or credit to be had. Just the way it is.
Apneaman on Sun, 7th Feb 2016 10:04 pm
US Oil Sands halts $60-million Utah project as prices tank, contractors close
http://calgaryherald.com/business/energy/us-oil-sands-halts-60-million-utah-project-as-prices-tank-contractors-close
Boat on Sun, 7th Feb 2016 10:06 pm
Fish Hook,
Yea but the US sells weapons to India and Pakistan who are enemies and have fought wars. Guess what, the congress is considering selling weapons to Vietnam. Who would have thunk it.
rockinr on Sun, 7th Feb 2016 10:06 pm
Okay,so we know all this because it was told to us many times before. The next disaster will be the banks.They lent so much money to the oil industry that they won’t get back. Then the house of Babel will come crumbling down. That four letter word”DEBT”.
Kaz on Sun, 7th Feb 2016 10:26 pm
strange that we keep on blaming the Saudi for the economic crisis, yet we have not pointed the finger at the other 20 plus countries playing big rule in oil production, including Russia, US, and GCC. seems that the media is trying now a days to change the picture of Iran that we all know and Push told us about previously “axis of evil” into this beautiful peaceful country. its funny how most of people fall for this, we should worry about Iran coming back as its still imposes threat to all of us..
joe on Sun, 7th Feb 2016 10:27 pm
What im seeing is the hippie generation of America and Europe ruining the world and mixing up the cultures because they think we should all get along. Its all fine and well. But social liberalism does not go as deep as the working classes and those in the social welfare net. The middle classes always tolerate other cultures but thats all, tolerate. Globalisation was invented by the hippies but it certainly found its best supporters amoung them. Especially with hypocrite liberals who sat by and let low cost labour make them rich and waxed about ‘multiculturalism’ and ‘integration’, all of which found their answers on the Twin Towers, Bali, Madrid, Charlie Hebdo, Paris, Cairo, Glascow and now Raqqa, not to mention Libya. The hippie generation has been counting their money rather than finding solutions, that along with legacy medical problems like aids, and global drug pandemics will see us wilting under the strain of trying to sort it out.
Now the Nintendo generation is taking over. Obama, hardly did anything as great as make peace with Iran its a good first step, the next miricle might be to find a political solution to jewish-muslim conflict, but I fear that 70 years of indifferent backing of Israel has put Americas reputation beyond repair forever in some parts, so a new departure is needed instead.
Saudi Arabia is not a Bedouin culture, its a socialist oilocracy, a kind ‘what if the nazis were muslim and they won’ kind of country, they are the model of what would happen in YOUR country if/when so called enlightended islam reaches your land in significant numbers. Oil is a tool in the hands of the Wahabbis, thats all, and means to an end. Merkel proboly got a big check from Riyad last year, ironically, because she is a women, islamic history will not record what she has done for the advancement of Islam in the world and will force her granddaughters and great – granddaughters back into the kitchen to stay barefoot and pregnant.
Apneaman on Sun, 7th Feb 2016 10:34 pm
“Globalisation was invented by the hippies”
I think someone left the gate open at the asylum. Super Bowl sunday. The Super bowl of retard commenters @ peakoil.com.
joe on Sun, 7th Feb 2016 10:42 pm
Typo, meant not, sorry.
GregT on Sun, 7th Feb 2016 10:44 pm
“World economic crises have been spurred by high, not low oil prices ”
With an emphasis on “have been”. The current economic crisis is being spurred by low oil prices. Go figure.
russ on Sun, 7th Feb 2016 10:56 pm
Do not be sucked into believing that low oil price is bad….everything or 99% of all products delivered are lower in price because delivery cost is lower….many speculators and retirement funds have been hit because the A-holes put there money in with the speculation that oil will always drift higher on average over time..to be sure times are changing, do not be fooled we will never get away from oil all together but now it is clear over time oil will drift lower and lower, unless a war breaks out and disrupts the flow. I for one am very happy to see Saudi and Russia in big pain…they are not our friends and never will be! Do not be fooled, in the short run many will be full of pain, they have money and will mis-lead you. The vast majority will reap a huge reward with cheap energy! Just look at your home gas bill, just look at your fuel bill to fill you car….just look its so very clear…it is right before your eyes!
steve on Sun, 7th Feb 2016 11:00 pm
what we may well be seeing here is that so-called peak oil is after-all utter nonsense in our current context. oil is just not worth so much after we see the supply is inexhaustable based on what we may really need going forward and SO the Saudi’s are deperate to pump hard and fast while still they may. just one view, there are many. predicting based on what i see, there will be a near total shift in energy within 10-15 years, outside forces and economy permitting all that to get going in such a time frame. nothing is certain, we’ll see if peace prevails, that’s the main thing overall and as always.
GregT on Sun, 7th Feb 2016 11:03 pm
“just look its so very clear…it is right before your eyes!”
Just like that forest right in front of you russ, the one hidden behind all of those trees.
Bloomer on Sun, 7th Feb 2016 11:26 pm
Russ is correct low oil prices is overall a positive for the global economy, but a disaster for those who make their living in the oil industry.
terry on Sun, 7th Feb 2016 11:39 pm
what goes around comes around. have you or any American enjoyed the cost of a gallon of gas the past 12 years or the price of milk or any other prices???? EAT YOUR OIL OPEC, NOW WE HAVE MORE THAN WE NEED !!!!!LOL
GregT on Sun, 7th Feb 2016 11:40 pm
“a disaster for those who make their living in the oil industry.”
Would those be the same people that supply the main energy source to the entire global economy?
Hmmm? Something isn’t adding up here. I can’t quite put my finger on it……………
mohammed shakil on Mon, 8th Feb 2016 12:38 am
if you just think of the vast universe and the omnipotent being running it and the utter human helplessness you can’t help believing that our fretting is of no avail against that being’s will. it seems that being is helping the Saudis now!
stop fretting and use your good sense. that’s all.
David Brekken on Mon, 8th Feb 2016 1:02 am
Actually I was thinking oil is still to high. With iran coming online should push to basement. Also progressive reduction in demand with china slowing. I fear cascading effects on foolish bankers to big to fail. collective foolishness in the western socialist countries causes multiple currency devaluation. Islam is whahabi Saudis. Do not be decieved, they are pushing the caliphate hard…
twocats on Mon, 8th Feb 2016 1:05 am
Dear God! Did some articles from peakoil.com get posted on zerohedge or something? It’s not in the list of “zerohedge reads”. How else to explain this sudden flood of stupid that’s hit the forums? Boat, I take back everything I’ve ever said about you, you are a goldmine of wisdom compared to most of this latest crop.
Boat on Mon, 8th Feb 2016 1:14 am
twocats.
Even you can be funny if you want to be. Lost but funny.
Boat on Mon, 8th Feb 2016 1:20 am
Doomers,
Some of us warned you about zero unhinged. But you may have found a way to get rid of me. I can’t handle kids with no real world experience. The apeman will go nuts. lol I do gotta see that. Lol
Boat on Mon, 8th Feb 2016 1:33 am
David,
“Actually I was thinking oil is still to high. With iran coming online should push to basement”
As long as the supply going to storage continues to grow, prices will continue to drop.
The world is up to over 500,000 barrels of oil and condensate in storage. 250,000 in gasoline.I can’t remember the diesel amount. Rock says there is 100 million barrels capacity at refineries. so you can guess at that added number.
Traders factor all that in when they make bids on shipments. I would assume storage would have to start dropping for at least a couple months before they go long. That is an uneducated guess.
Of course Iran’s production will also cause a delay in higher prices and I don’t think Iran itself knows how they will do over the next year. Lot of ifs.
GregT on Mon, 8th Feb 2016 4:51 am
“I can’t handle kids with no real world experience.”
You continue to ram your foot even further into your mouth Boat. Again, you prove without a shadow of a doubt, that you are a complete and total moron. You don’t have the slightest idea of what you are going on about.
No real world experience? Fuck are you ever stupid.
JCK. on Mon, 8th Feb 2016 5:59 am
Some where in this equation is the fact that obama has done everything possible to sell out U.S Oil to green energy.
That includes helping Iran to further their plans to destroy all things Western. Fire the kid, hire a real man and the U.s will tell Saudi where to stick their oil.
Dahun on Mon, 8th Feb 2016 7:13 am
The solution to protect American jobs, the American economy and preserve American and world security would be to place an import tariff on imported foreign oil. Canada did this for many years to establish it’s tar sands which enabled it to be the largest importer of oil into the US.
Apneaman on Mon, 8th Feb 2016 7:34 am
Dahun, there are American jobs? Jobs that can only be done in America? I’ve read plenty of words from capitalists/techno industrialists and what I get from them is that the jobs belong to them and they will decide who gets to preform them. The 1%ers who own the jobs are stateless. Don’t give a shit about America or you or any country.
loe on Mon, 8th Feb 2016 8:03 am
The depression of the 1930’s in part was caused this exact oil volume and low prices. Crude prices at this level is an indicator of how bad the american economy is, the same can be said of the chinese economys fall in relation to the failure of the american economy.
klace on Mon, 8th Feb 2016 8:16 am
MUST READ AS there are still grieving AMERICAN families that would like answers
http://www.wrmea.org/1993-june/the-assault-on-the-uss-liberty-still-covered-up-after-26-years.html
aa on Mon, 8th Feb 2016 8:33 am
The world needs to jack up the price of food that is sold to the Saudis. let them drink their oil.
Freedom lover on Mon, 8th Feb 2016 9:04 am
Saudi Arabia should be our sworn enemy. 80% of the 911 hijackers were Saudi Nationals and the Redacted (Classified) 28-pages of the 911 commission report document Saudi Government support for these hijackers. If Washington was not in the pockets of the Saudi’s and the neocons we could solve the middle east situation quickly. First slap a $50/bbl fee on all Saudi/Quatari imported oil to the United States. Cut a deal with Russia to supply oil long term at $75/bbl. Join Russia in earnest in the fight against ISIS (Russia knocks them out in Syria, The US and NATO in Iraq) If the Saudi’s and Turks continue to give arms and assistance to ISIS bomb them.
Samir on Mon, 8th Feb 2016 9:15 am
Unfortunately, our Israeli friends keep supporting the Saudi agenda in the region too. Israel is ally of US so long as we heed their way in MidEast, but they do not give anything in return to US. Moreover, Israel does not have the strategic importance once it had in the past. It is imperative to place pressure against the Saudis to change their behavior, otherwise we will have a regional war in the Middle East that will make the current conflict in Syria look like a civil war in Africa compared to WWII. Entire economy of Russia depends on oil and Putin won’t allow its nation’s collapse at cost of Saudi interest, they will force the Saudis to change behavior and they have the guns to do so.
techkno on Mon, 8th Feb 2016 11:26 am
Anyone remember the television ads for “Crazy Eddie” from the 1980’s? “His prices are INSANE!” I think this applies to today’s oil prices. Behind ‘Crazy Eddie’s’ appearance of success was a lot of fraud. It seems analogous to the credit bubble that seems to be feeding investment in unconventional oil.
Additionally, as disappointed as I was in COP21 – the Paris climate treaty – I think that the stated desire of the parties to manage carbon and global warming, plus the relevant statistics concerning wind and solar power prices and installations are driving the Saudis and maybe the Iranians and other oil producers to hold a ‘clearance sale’. Who wants to get stuck with a bunch of ‘sequestered’ assets?
If the approaching demise of the coal industry is a bellwether for the fossil fuel industry then oil producers better ‘make hay before the sun shines’.
There was a time when visible air pollution was a bigger concern in the United States, before somebody shipped heavy industry overseas with the jobs. Regulations and expensive technologies were forced on industry due to public pressure. If people in Florida eventually draw the connection between atmospheric carbon and wet ankles, or people of the mid Atlantic states get cranky about 2 feet of snow, or folks in California decide that 1000 acre camp fires are tedious, then there could arise a demand that carbon be left in the ground. Oil company executives will ride the gravy train receiving generous salaries until the train runs off the tracks then they will bail out, declare bankruptcy and socialize the costs. (We get to pay for transition, mitigation and health and environmental concerns.) This is a time tested program and will surely work one more time.
Chuck on Mon, 8th Feb 2016 1:12 pm
You all are missing the point…..finally we have an article that raises eyebrows about the Saudi’s scheme to destroy US and other oil producers. Kudos to the writer for having the testicular fortitude to bring this out in the open!
geopressure on Mon, 8th Feb 2016 1:28 pm
Chuck, there are no shortage of articles like what you described… Where have you been???
These articles are all wrong, of course…
Apneaman on Mon, 8th Feb 2016 1:29 pm
Chuck, thanks fer learning us up on yet another destroy America plot. Everyone should know that when anything goes awry for any American industry in any way shape or form, surely there are nefarious foreign forces at work against the indisposable exceptional jesus approved nation. America can do no wrong. Never has, never will – always always someone else’s fault.
GregT on Mon, 8th Feb 2016 1:37 pm
“finally we have an article that raises eyebrows about the Saudi’s scheme to destroy US and other oil producers.”
The Saudis produce ~10% of the world’s oil. The other 90% of world oil producers could cut production just as easily as the Saudis. Pointing fingers at Saudi Arabia is ridiculous.
Tom on Mon, 8th Feb 2016 1:42 pm
You should change your name from PeakOil too Oilglut. The Saudi’s are only one player in oil. The glut is going nowhere, unless companies go under. Its just going to take time for it to shake out. The cycle then starts over, like it always does. What goes up, must come down. Its just business.