Fareed Zacharia’s Washington Post article put the rise of ISIS and the Iran deal into the greater context of oil prices falling and a long
term glut. Zarcharia argues that Saudi Arabia is the primary cause because it
is willing to keep pumping oil in spite of declining profits to hard Shale,
Tight Oil, Russia and especially Iran but the long term willingness of Saudi
Arabia to continue is harder to read than stated by Fareed. There is a new King
and more importantly a frequently less experienced court making economic and
military decisions. However, North America’s available oil reserves are up, current
production will not be affected by the price of oil. American Interest makes a similar statement
suggesting both US producers and OPEC are “holding steady at remarkably high
levels” of production. Bloomberg reported, “U.S. shale oil production will
eventually respond to low prices, with access to finance dwindling as “capital
markets are getting nervy,” Citigroup said”” meaning we may not have seen the
bottom price of oil but the bottom is not likely the resting place for oil
prices. The lesson North America should get out of this is that over production
does protect the price of oil and that may be worth the high investment cost.
No one should assume that Russia, Iran and Venezuela will not eventually
rebound just on the price of oil alone, there certainly could. But there is a short term opportunity,
meaning for four or five years domestically sponsored political change in these
counties is possible as well serious instability. Wherever the chips fall by
the end of that time will result either in world problems that need to be dealt
with or a more stable international scene.
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