US Oil and Gas Fracking and Saudi Arabia oil are Financially Weakening Russia and Iran

Thomas Friedman at the New York Times discusses how lower oil prices helps Saudi Arabia and the United States and hurts Russia

The late Yegor Gaidar, who between 1991 and 1994 was Russia’s acting prime minister, observed in a Nov. 13, 2006, speech that: “The timeline of the collapse of the Soviet Union can be traced to Sept. 13, 1985. On this date, Sheikh Ahmed Zaki Yamani, the minister of oil of Saudi Arabia, declared that the monarchy had decided to alter its oil policy radically. The Saudis stopped protecting oil prices. ... During the next six months, oil production in Saudi Arabia increased fourfold, while oil prices collapsed. ... The Soviet Union lost approximately $20 billion per year, money without which the country simply could not survive.”

Neither Moscow nor Tehran will collapse tomorrow. And if oil prices fall below $70 you will see a drop in U.S. production, as some exploration won’t be cost effective, and prices could firm up. But have no doubt, this price falloff serves U.S. and Saudi strategic interests and it harms Russia and Iran. Oil export revenues account for about 60 percent of Iran’s government revenues and more than half of Russia’s.

US oil production and natural gas production are hitting or will soon hit the highest levels they have ever been. China and India and developing countries have slower economic growth which reduces the demand for oil. Japan and Europe are going through economic problems that is reducing growth and demand in those areas and around the world.

Saudi Arabia is not cutting oil production in spite of lower oil prices in the $80 per barrel range.

Oil production is high in spite of production problems in Iraq, Libya and other countries.


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