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With the pain sensation of rock-bottom oil prices leaving producers increasingly desperate, Saudi Arabia now agreed in principle with Russia, to freeze oil output at January levels D essentially paying lip service to the notion of price stabilization, given that January’s oil output was near a record high. Riyadh’s tepidness towards shoring up oil prices raises a question: Why are the Saudis – long the champion of higher oil prices – content to continue the popularity of plentiful, cheap oil exports?
As oilsands punished, tanker loads of cheap Saudi oil sail into Canadian ports daily
As federal and provincial politicians pat on their own the rear for his or her global warming ‘leadership,’ and pipeline opponents gloat about stalling construction of recent Canadian pipelines, tanker-loads of foreign oil are delivered regularly to Eastern Canadian refineries, including increasing volumes from Saudi Arabia.
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The short response is that the Saudis are conducting a not-so-subtle campaign of economic warfare against Canada and other upstart oil exporters to permanently cripple their respective oil industries. By enduring some short-term pain at US$35 per barrel or lower, the Saudis can sideline the kind of Canada and Venezuela and be sure a long-term command of the global oil market. Strangely enough, Canada helps them do it.
Saudi Arabia isn’t any stranger to presenting oil as a weapon in the international relations. While everyone is familiar with the oil crises of the 1970s, often overlooked are the Saudis’ actions within the 1980s. In September 1985, keen to both improve relations with the United States and belatedly punish the Soviet Union for its invasion of Afghanistan, along with other misdeeds in the centre East, Saudi Arabia flooded the planet oil market, quadrupling its output in only six months. The Soviets, still floating around the sky-high oil-shock prices of the 1970s and heavily reliant on oil as a chief supply of foreign hard currency, were hit hard. Economists put the toll around the Soviet economy at US$20 billion each year, signaling the start of no more the Ussr.
We are assisting to accelerate the rate of the energy sector’s decline
In a case of history repeating itself having a twist, Canada in particular now occupies the previous role from the Ussr. A burgeoning oil producer with sizeable reserves, and an economy tied closely to its energy sector during the last decade, Canada’s recent rocketing in the listing of largest oil exporters has clearly not gone unnoticed. Venezuela, which too enjoyed its very own oil boom over the last decade, is within a similar boat. The Saudi’s arch-rival Iran, recently freed from punishing economic sanctions, is also set to get back into the oil game. Saudi Arabia, meanwhile, has clearly had enough.
While high oil prices benefit – and essentially sustain – the dominion, additionally they pose significant risk. With competition from Canada and Venezuela, and also the suddenly formidable U.S. shale regions, the Saudis risk losing share of the market to countries with no same political, environmental and ethical baggage. In particular, as greater U.S. share of the market would go to its more politically palatable oil-producing rivals, the Saudis also face losing clout with Washington.
