WSJ: Saudi Arabia's Oil Equation

Low oil prices as well as public apathy will give the Dems the opportunity to come down hard on the oil and gas industry in the US. I’ll bet we see massive amounts of Federal land become off limits to new and continued exploration.

ZAKLY!!

Saudi Arabia is acting like a smart heroin dealer: they give us enough junk to keep us addicted by they avoid killing off their cash cow.

hmmm...an interesting theory but do you really think that's why the bottom has fallen out of oil prices?

“hmmm...an interesting theory but do you really think that’s why the bottom has fallen out of oil prices?”

No. I do not think the Saudis are that smart. I do, however, believe that they are being pretty cagey by refusing to cut output immediately at this time.

What is not commonly appreciated is that there are significant political tensions within OPEC that could be exploited if Western political leaders were more adroit.

Most cartels eventually collapsed because of such internal political tensions. After the first Gulf War OPEC very nearly collapsed because the Saudis greatly ramped up production. OPEC nearly collapsed again during the 1998 - 2000 period when a barrel of oil fell to less than $9.00 per barrel.

If the U.S. had looked upon this as an opportunity rather than a problem we could have broken OPEC’s back during this period. Instead of locking out more and more areas for oil exploration as a sop to the environmental lobby a small move toward exploration could have crushed OPEC.

The accession of Obama could not be worse from this perspective. The enacting of even a small part of McCain’s energy proposal would have consigned OPEC to the dustbin of history.