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Iran & Russia
The $117-a-Barrel Alliance
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  • rheddles

    Lots of Shiites on the east coast of Saudi and Bahrain. Good next targets for Iran in an area where Putin might have little objection to regime change. In fact it would take the US down a peg or two and reduce supply. That’s why Saudi kings go to Moscow.

  • Jim__L

    Fascinating analysis of the interests here — China likes cheap oil, Russia and Iran want expensive oil, frackers in the US like expensive oil, everyone else in the US wants cheap oil…

    We’ll see who wins.

  • truthsojourner

    Flawed analysis: at $117 a barrel, US fracking again becomes highly profitable, and the wells go back on line. Saudi Arabia once again finds itself in the fix it was in before, when it tried to break the American fracking industry. Didn’t work then, and it won’t work now (as long as the Dems in the WH and in control of the state governments don’t muck it up).

    • Jim__L

      Possibly the best evidence that Obama is not truly a Russian agent.

      • f1b0nacc1

        Certainly not a competent one, anyway…

    • MindTreeX

      Exactly what I said. Russian and Iranian efforts to increase the price of oil will only help America’s fracking industry. Thank You.

  • christophergreen

    The US could destroy the Chinese economy by not defending the Persian Gulf from China’s ally Iran. The Chinese have a very strange foreign policy.

    • MindTreeX

      good point. Let the Chinese ensure the flow of oil through the straight of Hormuz for a while. Then they will see the real cost to their economic miracle is paid in large part by the United States.

  • Blackbeard

    Not everyone in the U.S. wants cheap oil: The Greens hate it. Potential sequence: Russian/Iranian pressure, plus lack of trust in the U.S., leads Saudi Arabia to cut production. Prices soar. In the U.S. President Hillary enacts tough anti-fracking regulations. Prices soar more. Good for all our enemies: Russia, Iran, Venezuela. Bad for the world economy.

    The really interesting question is when will the Chinese realize that now that the U.S. Is retreat that they need to step up.

    • ImperiumVita

      I doubt Hilary would be any more tough on fracking than Obama, who hasn’t been tough.

    • mulp

      Oil workers obviously want low oil prices with US policy doing everything to increase Saudi and its minions oil production, and strong dictators backed by US military greatly increasing African oil production, and the Big Oils like Exxon and BP want more Federal leases to drill baby drill to record high profits because the highest job creation in the fossil fuel sector comes when oil and gas production is flooding the market and the price of a barrel of oil is heading to $40 a barrel.

      All investors in oil and coal companies obviously want natural gas supply to increase even more so the prices falls even more because cheap gas will make burning coal far more profitable, and the NGLs will flood the refineries with lighter crude to produce lots of gasoline and propane to drive much higher profits in the US fossil fuel sector!

      After all, this is the fundamental lesson of Reaganomics, higher energy supply means lower prices, more jobs, and higher profits!

    • MindTreeX

      You may consider Hilary an idiot, but no one at such a high level of world politics would be foolish enough to enact anti-fracking regulations after a Russian-Iranian induced reduction in Saudi Arabian production. Your comment is void.

  • Mark Michael

    The WSJ excerpt does not mention the Kurds or Turkey. What role do they play in this complex situation? Turkey’s prime “enemy” remains the Kurds in their own country, and, if they move over the border into either Iraq or Syria, then they want those militias defeated. The Turks are Sunni just as ISIS is, so they are more likely to attack Kurdish militias than ISIS. The Kurds have wanted to export oil from the Kurdish part of Iraq for a long time. Baghdad has been against this implacably.

    Another factor is Iraq’s southern oil fields and their role in providing financial resources to Baghdad. They had increased production above what Iraq had before the US invasion – finally. ISIS would like to disrupt this oil production if they could. Turkey’s AKP party has turned increasingly towards autocratic Sharia Law style rule. Their big election loss recently made Recep Tayyip Erdogan show his true Islamic colors with respect to the Kurds and more secular parts of the Turkish population. The EU/NATO countries don’t seem to face up to this turn by Turkey so far.

    • Sebastian Cremmington

      Don’t you wish Rove would have not given the absurd directive to the administration not to discuss oil with regard to the Iraq War? Turns out Iraq was going Shia all along because the oil producing region is Shia!?!

      Just like WWI undermined tariffs and WWII was the engine that pulled the world out of depression the Iraq War was always going to center around the extremely important global oil market but political considerations forced Bush to avoid discussing oil.

  • justin bristow

    Due to fracking, the only way prices go up again is to eliminate production, not cut back production. The Gulf will need to be in flames and Saudi wrecked for that to happen.

    Westerners always focus entirely too much on money making. Russia’s economy will shrink less than 4% after bottoming out. With a stagnant population that is practically nothing. Ukraine has fallen 17% since 2013 and still holds together, if you think the Russians aren’t as tough as their western neighbors, think again. Russia can probably withstand a loss of 20-25% of its economy with the regime intact, even popular.

    If anything, the low oil prices are allowing other sectors of the Russian economy to get much needed attention. The growth in the non-oil based sector has made the economic decline extremely mild.

    • bscook111

      Well said. Finally someone uses their head.

    • MisterEd13

      Even that wouldn’t do it, and some day soon, Californexico will have to admit the ONLY way to avoid insolvency (they’re already bankrupt) is to drill, and they are sitting on more oil than the entire Middle East.

  • themaskedblogger

    I don’t see how anybody, not just Russia and Iran, can work toward higher oil prices without restarting the same fracking boom that gave them trouble in the first place. Fracking existing wells is easier, cheaper and faster than drilling new ones.

    • Eric M Krehemker

      Well to be completely truthful, it was not all about fracking though that was a significant part of it. Along the way new sources of iol have been found at home that did not require fracking.

      • themaskedblogger

        Oh, no doubt. Each has their place. I have a couple customers who are doing deep marine recovery, and they’re just astonished at how much oil is down there. The trick is developing systems that can get down to it. The point I was hoping to make, though, is the nature of fracking is such it is short lead time, short payout period, and not particularly capital intensive, none of which is true for conventional wells. This will– always and forever more, I think– mean people playing cartel games will have very short time frames to cash in and catch up once they let prices rise, because a fracker can bring oil to market 30 or 40 days after the bank writes the check.

  • invention13

    Or, alternatively, get a full blown war going in the middle east – suppose Saudi Arabia were effectively taken off line?
    It wouldn’t affect either Russian or Iranian oil production all that much.

  • MisterEd13

    There is nothing the Saudis can do to jack up oil prices. There is plenty without them.

  • chris chuba

    Yes indeed. It is the evil Russians and Iranians who are plotting for a huge increase in the price of oil and the only thing blocking them are the good and noble Sunni states like Saudi Arabia, Qatar, and Kuwait who stand in the way. The good and noble Sunni states do not foment any problems in the M.E. and do not themselves have an interest in high oil prices.
    In Syria, the Saudi’s have only bankrolled the Sunni Jihadists for the good and noble cause of Democracy.

    • chris chuba

      Needless to say, I am pointing out that we are finding new and creative ways to hate the Russians and Iranians and overlook the bad behavior of the Sunni states. The Iranians might actually care about the Shiite minorities being butchered by the Sunni’s. Also, the Russians have a lot to gain by a stable M.E. 1. Jihadists will pump as much oil as they can, 2. The Russians would like to sell weapons to STABLE M.E. countries rather than Jihadists, 3. The Russians would be able to sell other manufacturing items to stable M.E. countries like airlines, satellites, and oil equipment.

  • MindTreeX

    Higher oil prices will only increase American production. Fracking benefits from higher prices because of scale. The fracking revolution is important to consider in the world oil market, I’m a little surprised Mr. Mead didn’t consider this in his calculations for this post.

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