Religion plays its part
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.”