Oil, gas, and the Saudi factor
Saudi Arabia's oil wealth gives it enormous influence in the world. Decisions made in Riyadh are felt from Moscow to North Dakota, Venezuela to Iran.
Saudi Arabia is only 82 years old. It has a population the size of Nepal’s; it is short on water and arable land, but rich enough to have superhighways, shopping malls, imported delicacies from around the world, and pricey desalination plants that make the desert bloom. It also has enormous global influence.
You can trace a dotted line from the kingdom to almost every current news headline. There’s a Saudi factor involved in conflicts in the Middle East, South Asia, and Africa; in Russian adventurism; climate concerns; the global economy; the future of alternative energy.
The Ur deal that founding father Abdelaziz Ibn Saud struck with Wahhabi clerics in exchange for their help in consolidating his family’s rule ensured the dominance of that strict interpretation of Islam. Then came oil. Six years after the country’s creation, the largest source of crude in the world was discovered at Dammam. The House of Saud became immeasurably rich and influential.
On the surface, wealth dampened tribal rivalries and gave the kingdom every modern convenience, but petrodollars also have funded the propagation of Wahhabism, which, directly or indirectly, has given rise to the Taliban, Al Qaeda, Islamic State, and other jihadist movements. Wahhabism might have won hearts and minds anyway as Muslims encountered it during the hajj, but oil money supercharged it.
In a Monitor cover story (click here), David Unger examines the reasons behind, and the implications of, the current drop in oil prices. Saudi Arabia is the key actor in this, having decided to continue producing well above what the world is consuming. If you are filling up your car, you’re glad. For Americans, the nearly $1 per gallon decrease since spring is the equivalent of a tax cut. China, Japan, the European Union, and other energy importers are being handed an economic stimulus package. But oil producers – including those who have recently made the United States a net energy exporter via hydraulic fracturing – are worried. So are Russia, Iran, Venezuela, Nigeria, and every other country that relies excessively on oil revenue and may face social unrest as economic hardship sets in.
By keeping output high and forcing prices lower, the Saudis are conducting a global economic experiment. Their aim is to protect market share. As David reports, however, it is not clear whether the Saudis control the energy market as they once did. Conservation and alternatives were aspirational in the 1970s when Jimmy Carter called the energy crisis the “moral equivalent of war.” Today, alternatives are practical choices for car buyers, homeowners, businesses, and communities because of technological advances, plummeting costs, and concern about carbon emissions.
This is a fascinating moment. Saudi Arabia is using the hydrocarbon treasure uncovered in the 20th century to ensure its place in the 21st. That won’t happen quickly. It will almost certainly require a sustained period of overproduction, which means a sustained period of low oil prices – with all that that implies. That dotted line will run from the kingdom to almost every news headline you will read in the months ahead.
John Yemma is the Monitor's editor-at-large. He can be reached at email@example.com.