Oil, the Saudis, and Iran

As global oil prices plunge to levels not seen in more than a decade—and Saudi Arabia and Iran threaten to further flood the market with cheap crude as part of their ongoing feud—the possibility of rock-bottom fuel prices appears to be a blessing for consumers.

What’s the downside of that? With our own restriction on exporting oil lifted, we’re also in a position to keep producing and keep selling. The low prices are good for American consumers; they’re an opportunity to expand our own market (the Saudis’ logic in maintaining production rates in the face of falling prices is sound), and thereby wean Europe off dependence on Russian oil exports; and low prices hurts…whom?

Low prices hurts our own oil producers, but an advantage of free market competition is that it leaves producers generally, including in particular oil producers, well positioned and well experienced in dealing with pricing vagaries. We’ll do fine in the price-competitive markets. The Saudis will survive the competition; their pricing needs against their population demands are rather small.

On the other hand, both Russia and Iran need $100+ oil (against last week’s close below $35, and a more stable $40-$50) to fund their adventures.

Keep the oil flooding. Throw us into that tar patch.

The Feds getting out of the way of natural gas exporting would pay similar, and similarly large, economic and political dividends.

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