WORLD VIEW: US has Saudi Arabia over an oil barrel

Trrump highligts arms sales to Saudi Arabia

679Views 3Comments Posted 01/01/2019

By Jonathan Power

Crown Prince Mohammed bin Salman remains at large, the unapologetic murderer (according to the CIA) of the respected dissident journalist, Jamal Khashoggi. Even though President Donald Trump came close to accusing him of the deed, he has pulled back, citing Saudi Arabia’s importance as an oil producer and arms buyer. The prime minister of the UK, Theresa May, is too preoccupied with Brexit to want to give up an important market. President Emanuel Macron of France is silent after an initial outburst. Now pressed by the demands of the demonstrators, he also wants to keep sources of revenue that come from sales of jets.

Last week King Salman stepped into the crisis. Whatever admonishment he may have given his son, he is clearly not prepared to sideline him from his seat of power. Instead he has compromised by merely reshuffling the cabinet.

The acceptance of the status quo must be halted. If Russia is to be penalized with sanctions for the murder on British soil of an ex-Russian spy living in Salisbury, so must Saudi Arabia be punished. In today’s world in peace-time such a murder is not just for condemnation, the perpetuators must be punished. It’s a crime against humanity and UN Security Council members should pass a resolution demanding the crown prince’s arrest and trial at the International Criminal Court. (The US, although not a member, has voted for a prosecution before.)

The arms purchases which are huge for Saudi Arabia are in fact only a small percentage of both America’s and Europe’s arms production. Given their brutal anti-civilian use in the war in Yemen they should have been halted long ago. With this added reason for cancellation, again the Security Council should vote on a resolution to ban them.

This will have little effect on Saudi Arabia. It has large stockpiles and spare parts can easily be bought on the black market. However, it is a shot over the bows.

Oil is another question. Oil prices have fallen dramatically the last two months to $50 a barrel. It’s opening up a great hole in Saudi Arabia’s budget. Oil importing countries have Saudi Arabia “over a barrel. The price must be held down until Saudi Arabia cries “uncle”.

Saudi Arabia has tried to persuade OPEC to agree to its members cutting their oil production without much success. Meanwhile, America’s shale oil production isn’t deterred by the low price. Production in the shale formation that stretches from west Texas to New Mexico, the epicenter of production, is still increasing. The US is now the world’s largest producer of oil. This is one of the key factors in the price fall. But the overwhelming majority of large shale oil producers are still making a profit.

Trump has said he is happy with this state of affairs, equating the fall in gas prices for motorists as akin to a tax cut.

The US is in a very comfortable position vis a vis the oil kingdom. So are the other Western nations. Trump has self-interested reasons for continuing on this path. The “tax cut” is worth more to the US economy than the value of arms sales. He is being pressured by a fairly united Congress to be tough on Saudi Arabia. He himself has criticized the murder. If his policy brings down the crown prince he won’t be particularly sorry. It will make him look good.


Saudi Arabia is the middle of a long-term program to diversify its economy so it can be less dependent on oil. Billions are being poured into industrialization and new cities. It is costing more than the country has available.

Its future looks bad. US oil imports have fallen from 13 billion barrels a day in 2005 to 2.4 b/day last year. It’s forecasted that this year they could fall as low as 330,000 b/d.

One would have thought the king, seeing what is going on, would have deposed his errant son by now. The only explanation for him not doing that is the mistaken belief that, under the influence of a further fall in prices, US production will contract and American pressure will ease.

But this is wishful thinking. The US is OK about the present price. Technological and efficiency gains are enabling oil-shale producers to still make a profit. Its production won’t contract. As for Saudi Arabia, it dare not increase production to drive the price further down to put shale producers out of business. It needs every dollar it can get for its own needs.

The Saudi’s bluff will soon be exposed. The Security Council must now make its move.





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Comments 3


The prolbem with this story is when oil was $64 only 33% of the frack companies were making money .so a sub 50 what is that percentage now

5 months ago
Richard Charron

Another of those rare incidents in which I agree wholeheartedly with Jonathan. He accidentally, I'm sure, gave credit to President Trump for his oil and gas policies which place the U.S. in such a great bargaining position.

5 months ago
George Klauck

PANAMA | Saudi Arabia / Russia Oil To Riches Diminishes The acceptance of the status quo must be halted. If Russia is to be penalized with sanctions for the murder on British soil of an ex-Russian spy living in Salisbury, so must Saudi Arabia be punished. In today’s world in peace-time such a murder is not just for condemnation, the perpetuators must be punished. Dictators kill any resistance even if it is only one man. Dictators kill with a penchant the reporting journalists. Dictators kill and look at this as a sport victory with high fives. Dictators than want to negotiate with the United States for what purpose? Germany buy their oil from Russia only rewards Russia. Venezuela president Maduro welcomes Russia and China for what purpose? Nicaragua and Cuba welcomes Russia with what purpose? Reporters and Journalist risks their lives from all manners of death. Death from sophisticated specialized agents made by the government. Death from sophisticated team of killers. Death from all forms of terror. Death of reporters / journalist is basically saying... "here's what we do to your reporters and journalists...hah...hah..." The world watches and does not see dictators will do anything they well please. What does China want with Panama? China just wants the world to know their... ***ONE CHINA PRINCIPLE*** China wants a New World Order! China wants the China Sea. China wants Taiwan. China wants Panama. Does any nation think Russia just wants Crimea? What does Russia really want? Russia used microwaves against the US diplomats in Cuba. China loses trade to the United States, it becomes useless to China. China wants more US factories at US expense. China wants US democrats to lobby for them. China wants Panama and to replace the Panamax canals. Panama... What does Panama want from China? Where does all that technology go? Where is the technology hidden? should know. China...Russia...Saudi Arabia...want... The US technology, artificial intelligence, control of... US power grids, computer network and to destroy US economy and to win over US corrupt politicians. When the United States is demoralized against their own president... the world watches in wonder at their own destruction.

5 months ago
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