Re­li­gion plays its part

Finweek English Edition - - Economic trends and analysis - HOWARD PREECE

WORLD OIL PRICES have been trad­ing in re­cent days at around 33% down on the near US$80/bar­rel lev­els that were hit in mid-July last year.

A key fac­tor is the strug­gle for po­lit­i­cal/re­li­gious mas­tery be­tween Saudi Ara­bia and Iran.

Oil prices vary marginally ac­cord­ing to the fuel type – eg, Brent trades around $1 higher than Amer­i­can light. Fluc­tu­a­tions in the over­all for­eign ex­change value of the US dol­lar – the rand’s worth against the green­back is cru­cial for South Africa – also af­fects “real” oil prices.

How­ever, al­low­ing for those fac­tors, the crit­i­cal fact re­mains that oil has tum­bled sharply from its peaks. Why? The most com­mon as­sump­tion was that it was pri­mar­ily due to an ex­tended pe­riod of com­par­a­tively warm win­ter weather, in the United States in par­tic­u­lar, at least un­til the past few weeks.

But power pol­i­tics in the Mid­dle East look to have much more im­por­tance, cer­tainly over the longer term. So much fo­cus goes on the US and Iraq that the real power game is mostly ab­surdly over­looked. That’s the his­toric strug­gle be­tween the Arabs and the Per­sians.

Ian Tal­ley, of the Dow Jones newswire, ob­serves: “Saudi Ara­bia’s grow­ing fear of Ira­nian hege­mony in the Mid­dle East may be driv­ing the world’s largest crude oil ex­porter to pre­pare a more ag­gres­sive long-term po­lit­i­cal oil strat­egy that could sub­vert an Ira­nian as­cen­dancy.”

Nawaf Obaid, a for­mer ad­viser to the Saudi gov­ern­ment, wrote in The Wash­ing­ton Post late last year: “King Ab­dul­lah may de­cide to stran­gle Ira­nian fund­ing of Shia mili­tias in Iraq (Saudi roy­als be­long­ing to a Sunni sect) through oil pol­icy. If Saudi Ara­bia boosted pro­duc­tion and halved the price of oil, the king­dom could still fi­nance its cur­rent spend­ing. But it would be dev­as­tat­ing to Iran.”

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