Free Preview of Members-Only Content
To view the requested intelligence, you must be a Stratfor.com member.
The long-awaited Jeddah Oil Conference on oil supplies was held and yielded the long-expected answer. The Saudis are going to increase oil supplies by the amount floated a week ago, and are prepared to increase supplies even more if there is demand for more product, which they do not see at this time. The subtext of the meeting was simple. Oil prices are not the result of insufficient supply or extraordinary demand. Supply and demand are pretty much balanced. Therefore, $135 a barrel for oil does not represent a problem to be solved; it represents a reasonable price for crude.
It doesn’t take a rocket scientist to understand the Saudi view. Making a $135 a barrel is better than making a $100 a barrel, and beats the hell out of making $50 dollars a barrel. In some cases, countries that buy oil might have non-economic leverage to use against oil producers. In the case of Saudi Arabia, the most important exporter, there is not much that can be done. On the contrary, the Saudis have the leverage.
The only country that could use political leverage against the Saudis is the United States, and at the moment the United States is more dependent on the Saudis politically than the other way around. The Saudis are critical to two major strategic U.S. initiatives: stabilizing Iraq and the Israeli-Palestinian talks. The Saudis are not involved in these matters for Washington’s benefit, but Washington is benefiting. There are no non-economic threats the United States could make, assuming it would really want to bring down oil prices.
| Stratfor Members, please log in at the top left hand corner |
