âSaudi oil policyâŠ has been subject to a great deal of wild and inaccurate conjecture in recent weeks. We do not seek to politicize oilâŠ For us itâs a question of supply and demand, itâs purely business.â
â Ali al Naimi, Saudi Oil Minister
âThere is no conspiracy, there is no targeting of anyone. This is a market and it goes up and down.â
â Suhail Bin Mohammed al-Mazroui, United Arab Emiratesâ petroleum minister
âWe all see the lowering of oil prices. Thereâs lots of talk about whatâs causing it. Could it be an agreement between the U.S. and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela? It could.â
Are falling oil prices part of a US-Saudi plan to inflict economic damage on Russia, Iran and Venezuela?
Venezuelan President Nicolas Maduro seems to think so. In a recent interview that appeared in Reuters, Maduro said he thought the United States and Saudi Arabia wanted to drive down oil prices âto harm Russia.â
Bolivian President Evo Morales agrees with Maduro and told journalists at RT that: âThe reduction in oil prices was provoked by the US as an attack on the economies of Venezuela and Russia. In the face of such economic and political attacks, the nations must be united.â
Iranian President Hassan Rouhani said the same thing,with a slightly different twist: âThe main reason for (the oil price plunge) is a political conspiracy by certain countries against the interests of the region and the Islamic world âŠ Iran and people of the region will not forget such âŠ treachery against the interests of the Muslim world.â
US-Saudi âtreacheryâ? Is that whatâs really driving down oil prices?
Not according to Saudi Arabiaâs Petroleum Minister Ali al-Naimi. Al-Naimi has repeatedly denied claims that the kingdom is involved in a conspiracy. He says the tumbling prices are the result of âA lack of cooperation by non-OPEC production nations, along with the spread of misinformation and speculatorâs greed.â In other words, everyone else is to blame except the country that has historically kept prices high by controlling output. Thatâs a bit of a stretch, donât you think? Especially sinceâaccording to the Financial Times â OPECâs de facto leader has abandoned the cartelâs âtraditional strategyâ and announced that it wonât cut production even if prices drop to $20 per barrel.
Why? Why would the Saudis suddenly abandon a strategy that allowed them to rake in twice as much dough as they are today? Donât they like money anymore?
And why would al-Naimi be so eager to crash prices, send Middle East stock markets into freefall, increase the kingdomâs budget deficits to a record-high 5 percent of GDP, and create widespread financial instability? Is grabbing âmarket shareâ really that important or is there something else going on here below the surface?
The Guardianâs Larry Elliot thinks the US and Saudi Arabia are engaged a conspiracy to push down oil prices. He points to a September meeting between John Kerry and Saudi King Abdullah where a deal was made to boost production in order to hurt Iran and Russia. Hereâs a clip from the article titled âStakes are high as US plays the oil card against Iran and Russiaâ:
ââŠwith the help of its Saudi ally, Washington is trying to drive down the oil price by ïŹooding an already weak market with crude. As the Russians and the Iranians are heavily dependent on oil exports, the assumption is that they will become easier to deal withâŠ
John Kerry, the US secretary of state, allegedly struck a deal with King Abdullah in September under which the Saudis would sell crude at below the prevailing market price. That would help explain why the price has been falling at a time when, given the turmoil in Iraq and Syria caused by Islamic State, it would normally have been rising.
The Saudis did something similar in the mid-1980s. Then, the geopolitical motivation for a move that sent the oil price to below $10 a barrel was to destabilize Saddam Husseinâs regime. This time, according to Middle East specialists, the Saudis want to put pressure on Iran and to force Moscow to weaken its support for the Assad regime in SyriaâŠ (Stakes are high as US plays the oil card against Iran and Russia, Guardian)
Thatâs the gist of Elliotâs theory, but is he right?
Vladimir Putin isnât so sure. Unlike Morales, Maduro and Rouhani, the Russian president has been reluctant to blame falling prices on US-Saudi collusion. In an article in Itar-Tass, Putin opined:
âThereâs a lot of talk aroundâ in what concerns the causes for the slide of oil prices, he said at a major annual news conference. âSome people say there is conspiracy between Saudi Arabia and the US in order to punish Iran or to depress the Russian economy or to exert impact on Venezuela.â
âIt might be really so or might be different, or there might be the struggle of traditional producers of crude oil and shale oil,â Putin said. âGiven the current situation on the market the production of shale oil and gas has practically reached the level of zero operating costs.â (Putin says oil market price conspiracy between Saudi Arabia and US not ruled out, Itar-Tass)
As always, Putin takes the most moderate position, that is, that Washington and the Saudis may be in cahoots, but that droopy prices might simply be a sign of over-supply and weakening demand. In other words, there could be a plot, but then again, maybe not. Putin is a man who avoids passing judgment without sufficient evidence.
The same canât be said of the Washington Post. In a recent article, WP journalist Chris Mooney dismisses anyone who thinks oil prices are the result of US-Saudi collaboration as âkooky conspiracy theoristsâ. According to Mooney:
âThe reasons for the sudden (price) swing are not particularly glamorous: They involve factors like supply and demand, oil companies having invested heavily in exploration several years ago to produce a glut of oil that has now hit the market â and then, perhaps, the âlack of cohesionâ among the diverse members of OPEC.â (Why there are so many kooky conspiracy theories about oil, Washington Post)
Oddly enough, Mooney disproves his own theory a few paragraphs later in the same piece when he says:
âOil producers really do coordinate. And then, thereâs OPEC, which is widely referred to in the press as a âcartel,â and which states up front that its mission is to âcoordinate and unify the petroleum policiesâ of its 12 member countriesâŠ. Again, thereâs that veneer of plausibility to the idea of some grand oil related strategy.â (WP)
Let me get this straight: One the one hand Mooney agrees that OPEC is a cartel that âcoordinates and unify the petroleum policiesâ, then on the other, he says that market fundamentals are at work. Can you see the disconnect? Cartels obstruct normal supply-demand dynamics by fixing prices, which Mooney seems to breezily ignore.
Also, he scoffs at the idea of âsome grand oil related strategyâ as if these cartel nations were philanthropic organizations operating in the service of humanity. Right. Someone needs to clue Mooney in on the fact that OPEC is not the Peace Corps. They are monopolizing amalgam of cutthroat extortionists whose only interest is maximizing profits while increasing their own political power. Surely, we can all agree on that fact.
Whatâs really wrong with Mooneyâs article, is that he misses the point entirely. The debate is NOT between so-called âconspiracy theoristsâ and those who think market forces alone explain the falling prices. Itâs between the people who think that the Saudis decision to flood the market is driven by politics rather than a desire to grab âmarket share.â Thatâs where people disagree. No denies that thereâs manipulation; they merely disagree about the motive. This glaring fact seems to escape Mooney who is on a mission to discredit conspiracy theorists at all cost. Hereâs more:
(Thereâs) âa long tradition of conspiracy theorists who have surmised that the worldâs great oil powers â whether countries or mega-corporations â are secretly pulling strings to shape world events.ââŠ
âA lot of conspiracy theories take as their premise that thereâs a small group of people who are plotting to control something, to control the government, the banking system, or the main energy source, and they are doing this to the disadvantage of everybody else,â says University of California-Davis historian Kathy Olmsted, author of âReal Enemies: Conspiracy Theories and American Democracy, World War I to 9/11âł. (Washington Post)
Got that? Now find me one person who doesnât think the world is run by a small group of rich, powerful people who operate in their own best interests? Hereâs more from the same article:
(Oil) âItâs the perfect lever for shifting world events. If you were a mad secret society with world-dominating aspirations and lots of power, how would you tweak the world to create cascading outcomes that could topple governments and enrich some at the expense of others? Itâs hard to see a better lever than the price of oil, given its integral role in the world economy.â (WP)
âA mad secret societyâ? Has Mooney noticed that â in the last decade and a half â the US has only invaded nations that have huge natural resources (mainly oil and natural gas) or the geography for critical pipeline routes? Thereâs nothing particularly secret about it, is there?
The United States is not a âmad secret society with world-dominating aspirationsâ. Itâs a empire with blatantly obvious âworld-dominating aspirationsâ run by political puppets who do the work of wealthy elites and corporations. Any sentient being whoâs bright enough to browse the daily headlines can figure that one out.
Mooneyâs grand finale:
âSo in sum, with a surprising and dramatic event like this yearâs oil price decline, it would be shocking if it did not generate conspiracy theories. Humans believe them all too easily. And theyâre a lot more colorful than a more technical (and accurate) story about supply and demand.â (WP)
Ah, yes. Now I see. Those darn âhumansâ. Theyâre so weak-minded theyâll believe anything you tell them, which is why they need someone as smart as Mooney tell them how the world really works.
Have you ever read such nonsense in your life? On top of that, he gets the whole story wrong. This isnât about market fundamentals. Itâs about manipulation. Are the Saudis manipulating supply to grab market share or for political reasons? THATâS THE QUESTION. The fact that they ARE manipulating supply is not challenged by anyone including the uber-conservative Financial Times that deliberately pointed out that the Saudis had abandoned their traditional role of cutting supply to support prices. Thatâs what a âswing stateâ does; it manipulates supply keep prices higher than they would be if market forces were allowed to operate unimpeded.
So what is the motive driving the policy; thatâs what we want to know?
Certainly thereâs a strong case to be made for market share. No one denies that. If the Saudis keep prices at rock bottom for a prolonged period of time, then a high percentage of the producers (that canât survive at prices below $70 per barrel) will default leaving OPEC with greater market share and more control over pricing.
So market share is certainly a factor. But is it the only factor?
Is it so far fetched to think that the United Statesâwhich in the last year has imposed harsh economic sanctions on Russia, made every effort to sabotage the South Stream pipeline, and toppled the government in Kiev so it could control the flow of Russian gas to countries in the EUâwould coerce the Saudis into flooding the market with oil in order to decimate the Russian economy, savage the ruble, and create favorable conditions for regime change in Moscow? Is that so hard to believe?
Apparently New York Times columnist Thomas Freidman doesnât think so. Hereâs how he summed it up in a piece last month: âIs it just my imagination or is there a global oil war underway pitting the United States and Saudi Arabia on one side against Russia and Iran on the other?â
It sounds like Freidman has joined the conspiracy throng, doesnât it? And heâs not alone either. This is from Alex Lantier at the World Socialist Web Site:
âWhile there are a host of global economic factors underlying the fall in oil prices, it is unquestionable that a major role in the commodityâs staggering plunge is Washingtonâs collaboration with OPEC and the Saudi monarchs in Riyadh to boost production and increase the glut on world oil markets.
As Obama traveled to Saudi Arabia after the outbreak of the Ukraine crisis last March, the Guardian wrote, âAngered by the Soviet invasion of Afghanistan in 1979, the Saudis turned on the oil taps, driving down the global price of crude until it reached $20 a barrel (in todayâs prices) in the mid-1980sâŠ [Today] the Saudis might be up for such a moveâwhich would also boost global growthâin order to punish Putin over his support for the Assad regime in Syria. Has Washington floated this idea with Riyadh? It would be a surprise if it hasnât.â (Alex Lantier, Imperialism and the ruble crisis, World Socialist Web Site)
And hereâs an intriguing clip from an article at Reuters that suggests the Obama administration is behind the present Saudi policy:
âU.S. Secretary of State John Kerry sidestepped the issue (of a US-Saudi plot) after a trip to Saudi Arabia in September. Asked if past discussions with Riyadh had touched on Russiaâs need for oil above $100 to balance its budget, he smiled and said: âThey (Saudis) are very, very well aware of their ability to have an impact on global oil prices.â (Saudi oil policy uncertainty unleashes the conspiracy theorists, Reuters)
Of course, theyâre in bed together. Saudi Arabia is a US client. Itâs not autonomous or sovereign in any meaningful way. Itâs a US protectorate, a satellite, a colony. They do what theyâre told. Period. True, the relationship is complex, but letâs not be ridiculous. The Saudis are not calling the shots. The idea is absurd. Do you really think that Washington would let Riyadh fiddle prices in a way that destroyed critical US domestic energy industries, ravaged the junk bond market, and generated widespread financial instability without uttering a peep of protest on the matter?
Dream on! If the US was unhappy with the Saudis, weâd all know about it in short-order because it would be raining Daisy Cutters from the Persian Gulf to the Red Sea, which is the way that Washington normally expresses its displeasure on such matters. The fact that Obama has not even alluded to the shocking plunge in prices just proves that the policy coincides with Washingtonâs broader geopolitical strategy.
And letâs not forget that the Saudis have used oil as a political weapon before, many times before. Indeed, wreaking havoc is nothing new for our good buddies the Saudis. Check this out from Oil Price website:
âIn 1973, Egyptian President Anwar Sadat convinced Saudi King Faisal to cut production and raise prices, then to go as far as embargoing oil exports, all with the goal of punishing the United States for supporting Israel against the Arab states. It worked. The âoil price shockâ quadrupled prices.
It happened again in 1986, when Saudi Arabia-led OPEC allowed prices to drop precipitously, and then in 1990, when the Saudis sent prices plummeting as a way of taking out Russia, which was seen as a threat to their oil supremacy. In 1998, they succeeded. When the oil price was halved from $25 to $12, Russia defaulted on its debt.
The Saudis and other OPEC members have, of course, used the oil price for the obverse effect, that is, suppressing production to keep prices artificially high and member states swimming in âpetrodollarsâ. In 2008, oil peaked at $147 a barrel.â (Did The Saudis And The US Collude In Dropping Oil Prices?, Oil Price)
1973, 1986, 1990, 1998 and 2008.
So, according to the author, the Saudis have manipulated oil prices at least five times in the past to achieve their foreign policy objectives. But, if thatâs the case, then why does the media ridicule people who think the Saudis might be engaged in a similar strategy today?
Could it be that the media is trying to shape public opinion on the issue and, by doing so, actually contribute to the plunge in oil prices?
Bingo. Alert readers have probably noticed that the oil story has been splashed across the headlines for weeks even though the basic facts have not changed in the least. Itâs all a rehash of the same tedious story reprinted over and over again. But, why? Why does the public need to have the same âSaudis refuse to cut productionâ story driven into their consciousness day after day like theyâre part of some great collective brainwashing experiment? Could it be that every time the message is repeated, oil sells off, and prices go down? Is that it?
Precisely. For example, last week a refinery was attacked in Libya which pushed oil prices up almost immediately. Just hours later, however, another âSaudis refuse to cut productionâ story conveniently popped up in all the major US media which pushed prices in the direction the USG wants them to go, er, I mean, back down again.
This is how the media helps to reinforce government policy, by crafting a message that helps to push down prices and, thus, hurt âevilâ Putin. (This is called âjawboningâ) Keep in mind, that OPEC doesnât meet again until June, 2015, so thereâs nothing new to report on production levels. But that doesnât mean weâre not going to get regular updates on the âSaudis refuse to cut productionâ story. Oh, no. The media is going to keep beating that drum until Putin cries âUncleâ and submits to US directives. Either that, or the bond market is going to blow up and take the whole damn global financial system along with it. One way or another, somethingâs got to give.
Bottom line: Falling oil prices and the plunging ruble are not some kind of free market accident brought on by oversupply and weak demand. Thatâs baloney. Theyâre part of a broader geopolitical strategy to strangle the Russian economy, topple Putin, and establish US hegemony across the Asian landmass. Itâs all part of Washingtonâs plan to maintain its top-spot as the worldâs only superpower even though its economy is in irreversible decline.
MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at [email protected].