September 13 , 2006

Falling Oil Prices: Big Trouble for Troublemakers

Catch the meaning of this amazing exchange from a Newsweek interview with the CEO of Shell Oil:  
 
Q: Do you agree with those like (British Petroleum’s) John Browne who see prices falling to $40, or even $25 to $30 a barrel in the long run?
A: We don't give the precise figures. But we do believe that future prices will be significantly lower than today.

A global oil price limbo dance could mean political upheaval or even revolution in two key enemies of the United States, Venezuela, and Iran, but also in a former superpower which, while not an outright enemy, wants to see the U.S. fail: Russia. All three have economies that are too reliant on oil and on high energy prices. One oil analyst speculated that Venezuela’s troublesome president Hugo Chavez would not be able to remain in power if Oil stays below $60 a barrel. Chavez has been using record oil profits to pay off his anti-American friends and buy influence throughout Latin America. 

Under the mismanagement of the Mullahs, Iran’s economy has been going sideways and backwards since the 1979 Islamic revolution. Iran is in such bad shape economically that there has been speculation that despite sitting on some of the world’s largest oil reserves, Iran does in fact need nuclear power because its energy refining sector is so dilapidated. Iran is a net importer of gasoline. That might be one of strangest things you’ll read today.

An oil price crash of the above-mentioned magnitude would also send Russia back to cold war-era destitution. Some Russian officials had been begging the Kremlin to promote diversification of the economy away from reliance on oil, and now it looks like it’s too late.

Then there is Saudi Arabia, where the royal family has used public payouts from oil money to a restive population to keep from coming completely unglued.  

So, in our cynical newsroom parlance, “sit back and watch the fun.”

From a journalist’s perspective, something very interesting is about to happen.