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Archive for January 28th, 2016

The End of Saudi Arabia?

Posted by addisethiopia / አዲስ ኢትዮጵያ on January 28, 2016

A more detestable regime than Saudi Arabia could not be found. Arguably the most repressive regime on earth. An absolute monarchy. A Wahhabist theocratic nightmare that arms ISIS. Only North Korea may be worse, and North Korea does not put women in burqas or have any areas where female genital mutilation (FGM) is practiced. It is a close call. At least North Korea does not ban alcohol.

Make no mistake about it: Shi’a Iran, as bad as it is, is nowhere near as oppressive as the Kingdom of Saudi Arabia (KSA). There are churches in Iran, albeit persecuted. There are none in the KSA. Not even a façade of tolerance. If Iran and the Shi’a-led Hezb’allah are the world’s chief exporters of terror, it is because they are more competent than Sunnis, not because their tyranny is darker than the KSA’s Wahhabism.

The Saud family came from the Arabian interior (the Najd) to overrun the west coast of the peninsula (the Hejaz – the historic center of Islam) in 1925. The Najd had survived mostly immune from imperial expansion basically because it was a useless wasteland that no one thought worth conquering, a unique honor it shares only with Antarctica.

The collapse of the Ottoman Empire, followed by British meddling, eventually led to the Saudi takeover of the whole area from their chief rival, the Husseins of Mecca.

The present worldwide depression – let’s call it what it is, not a recession – is partly the direct result of Saudi manipulations.

Fracking, particularly in the United States, was on the verge of making the USA independent of oil imports. Europe, Latin America, Oceania, and China were all starting to frack. As technology got cheaper, Saudi Arabia knew that, left unchecked, one day the world would break free of Muslim oil extortion, and their cash cow would be kaput. The KSA, which produces little else, would be back to selling sand, and the Quranically approved as healthful camel urine – but since dromedaries are not unique to the peninsula, even that market would be lost to them.

The Saudis have been at this oil price manipulation game for over 40 years.

The OPEC nations, led by the KSA, created a worldwide recession with the oil embargo in 1973, to protest Israel’s victory in the Yom Kippur War. Afterward, the price of oil would double. Nations that were on the verge of a middle-class breakthrough, like Brazil, were throttled back to poverty after the enormous price-gouging. The USA became frozen as a net importing nation. This set back Westernization, and the Industrial Revolution, for decades in the emerging world.

Initially, to keep oil prices up, the Saudis would drop production by 75%.

However, the artificially high cost of oil led to massive exploration. North Sea oil came online. The Saudis were starting to run budget deficits, and they blinked. They decided to drop prices and sell more oil to break the competition.

The ’80s price drop crushed the nascent shale industry for decades here in the USA. American energy independence was forestalled, as the Saudis wanted.

The low price of oil eventually gave way to price increases as Chinese industrialization came online with massive demand. By 2008, oil was at $145 a barrel. Of course, the 2008 crash brought some relief to that.

At the same time, fracking was taking over and competing with Saudi crude. There was serious talk of the USA becoming oil-independent. The KSA was in a real fix, and everyone knew it. Small nations, like Ireland, were pondering becoming oil-rich. Ojalá! Even the detested Jews were swimming in oil.

In 2014, the Saudis decided to dump oil on the market at low prices again in order to drive foreign competitors out of business, as they had in the 1980s. Once the American frackers were broke, once the cost of Israeli drilling became prohibitive, and after everyone else was shut down, the Saudis could ratchet up the price all over again. This would also have the benefit of destroying the hated Shi’a mullahs of Iran, with their nuclear program that threatens the Sunni KSA. A poorer Iran would mean no Iranian nukes to worry about. No Iranian sponsorship of Syria’s Assad.

Price-fixing at its worst. Were this done inside a country, it would be illegal. The Saudis get away with it because they are independent.

The price drop has had a massive effect on the market. Some U.S. frackers went bust. Brazil’s Petrobras is selling assets on a fire sale. Much of China’s and Brazil’s economies has collapsed. Chinese oil firms took a massive hit.

The economic devastation you see all around, as markets collapse, is due in no small part to the KSA’s manipulations – manipulations that have throttled progress for decades.

However, the Saudis have made a major blunder this time. Technology is still making fracking cheaper. So a considerable number of frackers are waiting out the storm. Once the Saudis raise prices, American exploration will be back online quickly. The KSA is fighting a losing battle.

Worse yet, any increase in prices will also help Iran’s budget. It seems the KSA is stuck at the bottom of the price graph, damned no matter what its monarch does.

In five years, the KSA’s foreign reserves are expected to be emptied out. Already, the KSA is dropping internal subsidies on electricity and domestic gasoline. The local people are upset. Upset Muslims means violent revolution.

For over forty years, this blight of a tribe has caused recessions, caused depressions, and damaged the planet’s economy. They got wealthy by re-impoverishing an emerging Third World, starting with the artificially created 1973 oil crisis. They have used their oil wealth to sponsor terrorism (as has Iran). Rather than investing wisely in industry to pick up market slack to become a modern diversified economy, they have invested instead in subsidizing mullahs, arming Salafist extremists in Syria, and exporting Islam around the world.

Now they have no options. Any increase in prices will restart American, European, and Chinese frackers. Failure to increase prices will bankrupt them. As a further blessing, we Americans will no longer have to hear the caterwauling idiocies of environmentalist Chicken Littles screaming about “peak oil.”

What the USA can do is protect its fracking industry by severely taxing any oil imports under $50 a barrel. This may upset some free marketers, but the price of oil is rigged. We should rig it in our favor, and insulate ourselves from Saudi manipulations.

Good riddance to the KSA – a corrupt, vicious regime! May their next chief export be bottled camel urine. I wish America had never gotten involved with them.



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