When 2007 started, oil was hovering at around $65/barrel. Then, it began to fall precipitously to as low as $50/barrel, even though OPEC said that they would defend oil prices at $60/barrel. Anyway, this is probably why you've seen gas prices slowly fall over the weeks.
In either case, I thought something was really fishy. Market analysts kept saying that oil prices were low because of the extremely mild winter that North America was experiencing. Heck, even Prime Minister Stephen Harper gave a speech in Ottawa about climate change, and he wasn't even wearing a winter coat. Ottawa was seven degrees celcius that day. From what I hear, everything in Ottawa is normally frozen around this time of year.
But anyway, last week the U.S. was hit by a massive deep freeze because all of this cold air from Canada made it all the way down to Texas. Even California was frozen, and a lot of its citrus crop was destroyed. Surely this would cause oil prices to jump up right? Nope, they dropped.
The conspiracy theory part of me wanted an answer to these crazy low oil prices. Then, I stumbled across this article from MSNBC entitled, "
Are Saudis waging an oil-price war on Iran?."
Oil traders and others believe that the Saudi decision to let the price of oil tumble has more to do with Iran than economics.
Their belief has been reinforced in recent days as the Saudi oil minister has steadfastly refused calls for a special meeting of OPEC and announced that the nation is going to increase its production, which will send the price down even farther.
Saudi Oil Minister Ibrahim al-Naimi even said during a recent trip to India that oil prices are headed in the "right direction."
Not for the Iranians.
Moreover, the traders believe the Saudis are not doing this alone, that the other Sunni-dominated oil producing countries and the U.S. are working together, believing it will hurt majority-Shiite Iran economically and create a domestic crisis for Iranian President Mahmoud Ahmadinejad, whose popularity at home is on the wane. The traders also believe (with good reason) that the U.S. is trying to tighten the screws on Iran financially at the same time the Saudis are reducing the Islamic Republic’s oil revenues.
For the Saudis, who fear Iran’s religious, geopolitical and nuclear aspirations, the decision to lower the price of oil has a number of benefits, the biggest being to deprive Iran of hard currency. It also may create unrest in a country that is its rival on a number of levels and permits the Saudis to show the U.S. that military action may not be necessary.
The Saudis firmly and publicly deny this, saying it’s all about economics. Not everyone believes them.
“If under normal circumstances, the price of oil was falling this dramatically [17% in the last few months], Saudi Arabia would have already called for a special OPEC meeting,” says one oil trader. “It’s got to be something else and that something else has to be Iran.”
I encourage you to read the rest of the article because it provides a lot of interesting supporting facts to back up this speculation.
The U.S. is definitely increasing pressure on Iran though. This month, they raided an Iranian embassy in Iraq. Another American aircraft carrier battle group has been dispatched to the Persian Gulf to apply military pressure to Iran. There's nothing more intimidating than an aircraft carrier parked by your country which sports a 1/4 acre of sovereign American air power.
In either case, kudos for using economic power to stop the Iranians from acquiring a nuclear weapon. Hopefully this could stave off a direct military conflict with Iran. I think the U.S. and its allies are far too war weary to fight yet another war in the Middle East.
