The Gulf States, Iran, and the Price of Oil

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The Gulf States with Saudi Arabia in the lead are scrambling to figure out what to do if American power in the Middle East continues to dissipate. One of the tools in their tool kit is to quietly over-supply crude oil into the global market and knock prices down.
This would not only make Iran worry about its income shortfalls and the domestic political impact of that — but also takes some of the flamboyance out of Russian and Venezuelan behavior lately.
The Saudis are now publicly talking about maintaining oil at $50/barrel. However, other Gulf region strategists tell me that they think that the real target is $40.
Bad for Iran. Bad for Russia. Good for American SUV drivers. Bad for the enviros and climate change activists — which is ultimately bad for life on this planet.
Given Bush’s authorization to troops to kill Iranians in Iraq (and perhaps a Presidential “finding” to kill Iranians in Iran), dropping the price of oil may come too late to affect the behavior either of Iran or the U.S.
— Steve Clemons

Comments

34 comments on “The Gulf States, Iran, and the Price of Oil

  1. Jim DiPeso says:

    We should not let last year’s low-key hurricane season, the warmer-than-normal winter, and Saudi manipulations lull us into complacency that the glory days of cheap oil and gas guzzling have returned.
    Rising demand is not going away, and neither are geopolitical stressors that could tip the global oil market into another price spike.
    Energy security concerns and global warming have created a political opening to ramp down America’s overdependence on oil. Let’s not fall for the House of Saud’s manipulations in pursuit of its Goldilocks price strategy – not too low in order to maximize revenues, not too high to keep the addicts, er customers, from getting uppity notions into their heads about fuel efficiency and alternative fuels.
    Let’s take advantage of that political opening to put a rational energy policy in place, including higher CAFE standards and aggressive development of cellulosic ethanol.

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  2. dan says:

    Considering that oil prices have bounced off their recent “lows” and are back in the $54-55 per barrel range, it would appear that $50 per barrel is the current floor on prices.
    Considering that in 2003 the OPEC target price range was $22-28 per barrel, I doubt that the prevailing price – or even a reduction to $40 – will be that worrisome to Iran.
    However, what everyone seems to forget is that one of the key components in the pricing mechanism is “what the market will bear”, and that the price rises of the past few years have demonstrated that the global economy can cope with a price-range of $50-60 per barrel without skipping a beat, and that oil was severely underpriced in the 1993-2003 period. It took a sustained period of prices north of $70 per barrel to curb demand growth/cut global demand and that this was followed by a relatively benign environment in the second half of 2006 ( no hurricanes, no major supply disruptions, inventory management and not much of a winter ).
    What this means is that the oil exporting nations, which are all intent on revenue maximisation, have a new price paradigm to play with, and can almost certainly maintain prices at $50 plus until major new supplies come on stream over and above the observed depletion in provinces such as Mexico, the US and the North Sea; this may not happen any time soon, if ever.
    Whilst the Saudis talk about increasing supply, their production numbers have been heading relentlessly downhill since the early summer of 2006 ( ie prior to the Lebanon war ); no one believes that they can suddenly flood the market with excess oil, and no one believes that they are going to leave OPEC.

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  3. Winnipeger says:

    i agree with den.

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  4. Den Valdron says:

    Given that Israel doesn’t export a barrel of oil a year, I have to question the relevance of Israel to this topic thread.

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  5. Winnipeger says:

    oh, poa, please give it up already!
    if you think i’m lying about being a member of Peace Now, then suit yourself, but what in the world do i have to gain by lying about what organizations i do and don’t support. further, have i ever been afraid to speak my mind in this forum?!
    regardless, the fact that i DON’T think it is responsible or factually correct to compare gaza or the west bank to “concentration camps,” is not in conflict with the mission of Peace Now.

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  6. DonS says:

    . . . lest we allow the Bush adminstation to so desensitize us to the expectation that they WILL attack Iran openly, that it becomes a fait accompli, a nonevent.
    Just a reminder.

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  7. Pissed Off American says:

    “and i find the fact that you choose to compare gaza (as bad a place as it may be to live) and ramallah to “concentration camps,” HIGHLY offensive.”
    Spoken like a true “Peace Now” member.
    Not.
    http://www.sourcewatch.org/index.php?title=Hasbara

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  8. Winnipeger says:

    atzmon,
    you may not want to “get into a debate about the truth of the holocaust,” but the fact that you preface your post with this type of rhetoric speaks volumes.
    allow me to remind you that there is NO serious debate about the truth of the holocaust!
    and i find the fact that you choose to compare gaza (as bad a place as it may be to live) and ramallah to “concentration camps,” HIGHLY offensive.

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  9. Pissed Off American says:

    “In other words, the next Holocaust is actually a collective punishment of Holocaust denial.”
    Bingo.

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  10. Atzmon says:

    Without getting myself into the debate regarding the truth of the Holocaust, the ugly face of Holocaust-politics cannot be hidden anymore. The Holocaust is now officially becoming an ideological weapon against Islam and also against Arab resistance. It is there to establish a fake western collective identity based on blind conformity and total marginalisation of the other.
    However, in the short term, the new American Holocaust political initiative may prove to be productive. The notion of the destruction of `European Jewry’ unites some major political powers. It unites the European parliamentary left together with the conservative liberals as well as America’s most radical expansionist forces. They all need the Holocaust for different reasons.
    In Europe, the Holocaust is there to dismantle the emerging far right. In the Germanic States the Holocaust is the core of the post-war symbolic order. For the Anglo-Americans the Holocaust is there to push away any real ethical engagement with Dresden, Hiroshima, Vietnam, Palestine and Iraq. Most importantly, the new Holocaust denial resolution provides the Americans with the pretext for the next Genocide. In other words, the next Holocaust is actually a collective punishment of Holocaust denial.
    Regardless of what the truth of the Holocaust is and what its denial may entail, to seal the past is to give away the vision of a better future. The end of history is the end of the West. Bush’s America may just want to take us there. With the death toll in Iraq numbering 650,000 and 3,000,000 displaced refugees, with millions of Palestinians locked in concentration camps for almost 40 years, neither Bush nor Blair nor any other Western politician can offer us a cheerful vision of the days to come. Instead they encourage us to stop looking into our past.

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  11. Pissed Off American says:

    Hey, I’m not tuning in unless Coulter joins the mix. After all, whats a menagerie without a Coulter? Hmmmmm, or, did I mean menage a trois?
    Oh…uh, never mind.

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  12. memekiller says:

    How about Limbaugh on Katie Couric’s Free Speech? Twice the credibility.

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  13. Pissed Off American says:

    Yes, but Obama doesn’t wear a tie. Doesn’t this concern you?
    Posted by memekiller
    Depends. Is it Rush Limbaugh that is telling me I should be concerned, or Katie Couric?

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  14. memekiller says:

    Yes, but Obama doesn’t wear a tie. Doesn’t this concern you?

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  15. Pissed Off American says:

    As an aside to the Blackwater presence in New Orleans, and the attempted convinscation of the firearms of legal residents, one has to ponder the NRA’s disengagement and silence on this issue. One would think they would have been all over this with public dissention and with demands for explanations and accountability.
    Weird.

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  16. Pissed Off American says:

    On a side note, the link posted on TWN the other day was chilling:
    “Our Mercenaries in Iraq: Blackwater Inc and Bush’s Undeclared Surge”
    http://www.democracynow.org/article.pl?sid=07/01/26/1559232
    “Erik Prince, Cofer Black, Christian Supremacists, etc. Very creepy. The emergence of the private security industry and their ties to the government and levers of power is frightening.”
    Posted by Easy E
    How many Americans know that Blackwater was patrolling the flodded nieghborhoods of New Orleans, carrying weapons prohibited by Federal law while the legally possessed weapons of New Orlean’s residents were being convinscated? While Blackwater employees were claiming to be under contract with FEMA, our Federal governbment was denying it. Who exactly, DID hire Blackwater mercenaries to prowl American nieghborhoods with fully automatic weaponry? And why? Was it is dry run? An experiment? Inquiring minds would like to know. Obviously, our Congress is devoid of such inquiring minds.

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  17. rich says:

    Steve,
    steve duncan and Easy E (above) have put their finger on the salient point in any discussion of sanctions or punitive responses to Iran’s nuclear power program.
    George Bush has already had covert ops squads operating inside Iran for several years. These are clearly Acts of War. They indicate the destabilizing and dangerous actor is America. Pressure must be put on Bush and the US to change course. Accountability and punitive measures must be enacted against America.
    Bush has ALREADY, by any definition, gone to war with Iran. These Acts of War don’t have any justification under the law, and are by any measure un-Constitutional, stretching beyond any imagined Power inherent in the Executive Branch.
    Such reckless actions, clearly getting the US in deeper, are precisely that kind of abuse of power the Constitution was designed to prevent. If not for pre-emptive, offensive, unprovoked wars of choice, embarked on with little thought and less evidence, then when WOULD a Congressional Declaration of War be necessary or justified? AT some point, disingenuous readings of the Constitution are disproven by current events, history, available technology, and any reasonable understanding of the English language.

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  18. Steve Clemons says:

    POA — many thanks for reposting that link. That story which came from Jim Risen’s book — the same book that outed the President’s warrantless wiretaps — is extremely important and not widely reported. I spoke to Risen last week and hope to stir that up again. We are flying blind inside Iran.
    Steve Clemons

    Reply

  19. Easy E says:

    On a side note, the link posted on TWN the other day was chilling:
    “Our Mercenaries in Iraq: Blackwater Inc and Bush’s Undeclared Surge”
    http://www.democracynow.org/article.pl?sid=07/01/26/1559232
    Erik Prince, Cofer Black, Christian Supremacists, etc. Very creepy. The emergence of the private security industry and their ties to the government and levers of power is frightening.
    Let’s hope that Waxman, Conyers, etc., initiate investigations soon. These groups and their agendas need to be exposed to the general public and put out of business before it’s too late.

    Reply

  20. DonS says:

    It does seem that trying to cajole Bush into becoming more of a diplomat is misguided, no matter how firmly planted in the “realist” camp the advisors may be. He doesn’t seem inclined.
    Bush is more of the problem than any sort of solution, AND, he is the element of the equation that we as Americans are responsible for and can remove from office. I am in the camp that feels our legislators are helpless, squealing eunichs and enablers. I.e., we are on a runaway train bent for hell. I relate to Marcia’s analogy of going over a cliff.
    I wonder if efforts such as Steve’s to put diplomatic lipstick on this pig do more harm than good. Getting rid of Bush and the cabal should be the priorty even if it labels one as not serious and reduces the availability of cocktail weenies. How else can we even hope to put brakes on this train and its Israeli caboose, or engine, depending on your perspective?

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  21. Pissed Off American says:

    This is interesting. Heres Steve, in an article less than a year old, warning that the threat posed by Iran may be hyped, and alluding to the mysterious and inexplicable outing of our human intelligence assets in Iran.
    Makes perfect sense. If you are going to lie about Iran’s WMD or nuclear program, you would hardly want real intelligence leaking out that may expose your lies. I wonder how many of these “assets” were imprisoned or beheaded because of this mysterious outing? It looks like Plame probably got off light, it coulda been worse, had she of been in country.
    Think Cheney got off while imagining the beheading of American intelligence assets? Monica’s blue dress pales in comparison. Cheney’s laundry bill must be horrendous.
    http://www.tpmcafe.com/node/28567

    Reply

  22. whynot says:

    The Saudi’s can jawbone all they want, and it may have a marginal effect for a short time. But Gwahr production is slipping and Mexico’s Cantarell numbers released Friday afternoon are devastating. Production numbers speak louder than words.
    http://online.wsj.com/article/SB116984658739189365.html?mod=googlenews_wsj
    Mexico’s Oil Output Cools
    Slowing of Major Field
    May Pressure Prices,
    U.S. Import Diversity
    By DAVID LUHNOW
    January 27, 2007; Page A3
    MEXICO CITY — Daily output at Mexico’s biggest oil field tumbled by half a million barrels last year, according to figures released Friday by the Mexican government. The ongoing decline at the Cantarell field could pressure prices on the global oil market, complicate U.S. efforts to diversify its oil imports away from the Middle East, and threaten Mexico’s financial stability.

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  23. Marcia says:

    POA: “You can take it to the Bank”
    I do not trust banks either. They might charge interest on lives lost. As this “War” has illustrated once again, “Money has no odor.”

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  24. Marcia says:

    POS: “You can take it to the Bank”
    I do not trust banks either. They might charge interest on lives lost. As this “War” has illustrated once again, “Money has no odor.”

    Reply

  25. Easy E says:

    ELBARADEI CALLS FOR TIMEOUT ON IRAN NUCLEAR PROGRAM
    DAVOS, Switzerland Jan. 27 (CNN) — International Atomic Energy Agency head Mohammed ElBaradei said Friday he was calling for a timeout regarding the Iranian nuclear issue, hoping that talks on the matter can resume.
    ElBaradei told CNN International that the timeout would mean Iran would freeze its nuclear program, while the United Nations would temporarily suspend the sanctions package against Iran that took effect last month.
    “The key to the Iranian issue is a direct engagement between Iran and the U.S., similar to North Korea,” ElBaradei told CNN International’s Becky Anderson. (Watch the full interview )
    “North Korea is a good example. For years, things were not moving. Only when the U.S. talked directly with the North Koreans, we had a positive report. If we are able to talk to the North Koreans, we ought to be able to talk to the Iranians.”
    According to a report last fall by Iran’s semi-official ISNA news agency, Iran had been conducting a small-scale research enrichment program using 164 centrifuges at its Natanz facility. ISNA said the country’s centrifuges are projected to number 3,000 by March.
    IAEA inspectors in Iran have reported that the Iranians will begin building a centrifuge facility at Natanz next month, an IAEA official told CNN on Friday. And the official said that the further down the nuclear path Iran goes, the harder it could be to get them to halt production.
    An Iranian official at the United Nations told CNN that he was not sure of the number of centrifuges, but that the degree of enrichment would only be high enough for civilian energy purposes. Tehran has maintained its nuclear program is aimed only at energy, while the United States and other Western countries are concerned it is trying to build nuclear weapons.
    Former U.N. nuclear inspector David Albright, however, said that 3,000 centrifuges would produce enough enriched uranium for one nuclear bomb. But, Albright predicted it would take Iran a year to get the centrifuges in place and another year to make the highly enriched uranium.
    Iran has banned 38 IAEA inspectors from entering the country. An Iranian diplomat told IRNA, the nation’s official state-run news agency, that inspectors whose countries voted for a U.N. Security Council resolution regarding sanctions on Iraq would be banned. ISNA did not name the diplomat, saying he spoke on condition of anonymity.
    ElBaradei told CNN that Iran was not banning inspectors, but attempting to reduce their number.
    “This reduced somewhat the flexibility we have, but I should say we have over 100 inspectors in Tehran, so we have enough people to do the job,” he said. “It is in the interest of Iran for us to be able to do our work and to be able to show that they are transparent and they are proactive.”
    The IAEA official said ElBaradei has not heard back from Iran on the timeout proposal. He must report back to the United Nations on the matter by Feb. 21.
    “I would like to report that we are back on the right track, and the right track is negotiation, dialogue and understanding where everyone is coming from,” he said. “If I report negatively, and we have escalation and counter-escalation, we are on the wrong track.”
    http://www.cnn.com/2007/WORLD/meast/01/26/davos.iran.nukes/index.html?eref=rss_world
    The above, of course, is being countered by AIPAC’s latest fear mongering and rush-to-war proclamations – – “Nuclear-Minded Iran Develops Satellite Launcher” http://www.aipac.org/

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  26. AC says:

    Is the dollar still slipping in value? Wouldn’t the Saudis be even better off if they took payment in Euros – thus damaging the US economy?
    It looks almost as though there is a quid pro quo between the HoS and the US. US imperial power is subsidized and encouraged by cheap and slightly more abundant oil to continue occupation (Iraq) and pre-emptive war (Iran). With the extra benefit to the US of hurting Venezuela a bit. At least the Bush Administration might perceive it that way.
    But reducing the per bbl cost of oil would hurt the Saudis also, as well as Iran, Venezuela, Russia. How long can the HoS sustain the reduced income they would feel?
    But low prices and high output by the Saudis may not be sustainable. I seem to remember that their stated oil reserves are actually in question, and they may be at or past their peak oil output. Could they maintain this for a year or two? And could the lifestyles of the various princes be sustained if their incomes go down measurably for the next year or two? (Yes, they’ve diversified their portfolios but still they get significant liquid capital from this source.)
    And lastly, will the Congress and the American people let the Bush Administration hurtle into another questionable war? Will Jim Webb and Chuck Hagel lead a Senate “rebellion” against Bush?
    A few gratuitous questions: What will George H.W. Bush say about this? Will he continue to be silent so as not to shame and offend his first born son who is wrecking the family reputation as well as world stability? And what about Kissinger? Where does he stand on this? Is he advising them to do it? And will any responsible Republicans still in power actually denounce these maneuvers?

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  27. Pissed Off American says:

    “Marcia, how many more lives will be lost? Tens, if not hundreds, of thousands. Bet the over.”
    Posted by steve duncan
    Both of you are wrong. Israel and Bush are going to tally deaths in the millions. Considering the deaths due to the sanctions against Iraq, estimated at over 500,000 CHILDREN’S deaths alone, and factoring in the first gulf war, PLUS the estimated 600,000 dead Iraqi non-combatants from this war, we are already well over one million. (I cite the first gulf war because it is my belief that it could have been avoided. That Saddam really did believe that we would not respond to his invasion of Kuwait. I believe we gave him a wink and a nod, that he was set up by Bush senior.)
    Anyway, so we are already well over a million. And these bastards have two more years in which to exterminate “evil doers”. It is obvious that our cowardly and compliant Congress is going to do nothing accept posture with non-binding resolutions, and Bush/Cheney will not be removed from the White House in leg irons, as they should be. So the killing is going to continue non-abated.
    Millions. You can take it to the bank.

    Reply

  28. steve duncan says:

    Marcia, how many more lives will be lost? Tens, if not hundreds, of thousands. Bet the over.

    Reply

  29. Marcia says:

    Perhaps we worry too much about all these little problems.
    It is Happy Hour on “Meet the Press.” Arkansas is coming to the rescue with another Presidential candidate. It is like driving over a cliff while discussing whether or not there is an ice cream store at the bottom.
    What the Saudi’s are saying is that the price of oil is totally artificial and they are the big boys on the block, which we already knew.
    Our world is being turned into a “Bush Gone Wild
    in the East” show with Cheney barking the merchandise. More oil, all mine, all mine.
    Bush is in his element here. He likes killing, you can hear it in his voice. When he speaks of killing there is a change in tone and warmth, a vibration he NEVER has otherwise. All his policies are concerned with death, control, killing.
    Will Congress do anything to stop the show or stay like giggling girls at the stage door to see if the performers get thrown out?
    How many more lives will be lost?

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  30. Peter Eggenberger says:

    In his testimony to the Senate Foreign Relations Committee, General Odom stated that from the 50s until the Bush administration, the U.S. aim in the Middle East was regional stability. A parallel would be Bismarck’s aim to create a stable balance of power in Europe. Bush changed U.S. aims, creating instability. Likewise, Wilhem II changed German aims, creating instability in Europe. I wonder whether we will thrill to a Middle Eastern Sarajevo incident in the near future.

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  31. steve duncan says:

    There are American agents in Iran fomenting dissent and revolt. The U.S. is engaged in very public sabre rattling towards Iran, with military strikes at least implicit. All this with no independent (U.N.?) official findings or investigations of U.S. allegations that Iran poses a threat to either Iraq, the United States or the Mideast in general. I wonder what the reaction would be if Iranian leadership made public they’d ordered the killing of Americans known to be a direct threat to their government? Like say, oh, George Bush and Dick Cheney. Tit for tat. Seems fair to me.

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  32. Easy E says:

    Something not reported in U.S. mainstream press:
    KERRY BACKS UP IRAN’S NUCLEAR RIGHTS
    TEHRAN (Fars News Agency)- Former US presidential nominee John Kerry voiced full support for the Islamic Republic’s right to use civilian nuclear technology on the basis of the rules and regulations of the Non-Proliferation Treaty (NTP).
    http://english.farsnews.com/newstext.php?nn=8511080271
    Regarding your comment
    “Given Bush’s authorization to troops to kill Iranians in Iraq (and perhaps a Presidential “finding” to kill Iranians in Iran)…”
    What should the Iranian response be when encountering U.S. special operations forces (CIA, Delta Force, Blackwater, etc.) that have been operating inside Iran for the past few years?
    U.S. foreign policy and politics of fear is absolutely disgusting. As Carroll says, “it’s time to burn Washington down and start over”.

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  33. km4 says:

    The ONLY OPEC country that can up oil production is Saudi Arabia but only by about 2.0 – 2.5M barrels/day. The world uses about 80 million per day.
    This is insignificant. The Saudi talk is bluster. This is NOT going to be bad for Russia, Venezuela, or Iran.
    Ironically, China and India would likely profit even more by fueling their growing economies even faster.
    Score another one for the ‘bonehead’ Bush admin.

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  34. PHB says:

    Alternatively the US gives Iran an incentive to seek a war with the US.
    If the US were to bomb Iranian military targets the Iranians would have the excuse to respond with attacks on the Saudi and Kewaiti oil extraction and shipment facilities and close the straits of Hormuz.

    Reply

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