- - Tuesday, May 15, 2018

ANALYSIS/OPINION:

It’s rare for the list of everyday annoyances to get shorter, not longer. But shrink the list did when the high price of oil crashed a decade or so ago, leaving Americans with a happy jingle in their pockets. Now several factors are converging to drive up the price of oil again, and motorists are feeling familiar pain in the wallet. Dread may return with every fill-up. The difference this time, though, is that the United States has new oil reserves in the Earth’s fractures beneath North Dakota, and now maybe Saudi Arabia wants to be a pal.

Apart from Israel, no other Middle Eastern nation has undergone a more sanguine reversal of fortune during the Trump era than the land of the House of Saud. Relegated to the sidelines of regional affairs by President Obama, who favored Shiite Iran, Sunni Saudi Arabia was the first foreign destination of Donald Trump’s presidency a year ago.

In contrast with the corrupt mullahs in Tehran and their relentless threats of doom against the West, Saudi Crown Prince Mohammad bin Salman has built ties with the West through the purchase of U.S. armaments and the loosening of Islam’s seventh-century religious taboos, allowing women to drive an automobile for the first time and granting them greater opportunities in the nation’s workplace. The king-in-waiting could further reinforce the friendship by loosening the flow of oil to the global marketplace.

An unexpected pothole has opened on the great American highway. The average price of a gallon of regular unleaded gasoline nationwide has risen to $2.87 at the pump, up from $2.34 a year ago. California, a leader of cringeworthy trends, has broken the $3 barrier and a gallon of gasoline there now costs an average of $3.69. Market analysts say increased demand for gasoline during the summer vacation travel season could drive the price tag in some regions above the record $4.11 a gallon set in July 2008.

It’s not unusual for the price of gasoline to climb when oil refineries shift to more expensive summer blends, but a sour brew of factors is stirring up a season of extra volatility. Political turmoil is obstructing oil production in several OPEC nations, including Nigeria, Libya and Angola. Venezuela’s decades-long experiment in socialism has led to a slow-motion economic collapse that could cut production this summer to half its 2016 level.

By President Trump’s assessment, rising oil prices are more the fault of politics than production. “Looks like OPEC is at it again,” the president tweeted last month. “With record amounts of oil all over the place, including the fully loaded ships at sea. Oil prices are artificially Very High! No good and will not be accepted!”

That was before the president’s decision last week to pull out of the Iran Nuclear Deal. The reimposition of stringent economic sanctions against Iran in coming months could prevent as much as 900,000 barrels of Iranian oil per day from reaching the international markets, according to Barron’s magazine, punching an additional hole in the global supply. The fact that oil prices reacted with little more than a one-day spike suggests Mr. Trump’s move was anticipated and had already been factored into prices.

The Organization of Petroleum Exporting Countries has partnered with Russia in recent years to cut an oil glut which is partly the result of soft demand during the Great Recession and partly caused by OPEC undercutting of the U.S. fracking phenomenon. OPEC succeeded in driving up the price per barrel of oil from below $28 in 2016 to $70 currently.

Calculating the forces that play into geopolitics is as difficult as predicting the weather, which can be as surprising as a freak snowstorm in May. Still, it doesn’t take a crystal ball for the Saudis to discern that fellow OPEC member Iran and non-member Russia are allied in a hostile bid to dominate the Middle East. Mr. Trump heard the cries of “Death to America” by the mobs in Tehran, and has acted accordingly.

When the chiefs of OPEC gather next month to establish oil production targets, the House of Saud could return the favor by using its considerable weight to open the flow of crude to the market. This would assuage pain at the pump and demonstrate that reciprocity works for the common good. It’s what friends are for.


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