Bucking The Trend

See that man in the picture below?

He is your friend.

He helps you lug the kids to weekend soccer matches. He soothes your guilt for buying one of those Monster Truck Sport Utility Vehicles that suck up gasoline like a teenager pulling up to a Big Mac. He's cut the cost of your Memorial Day auto excursion.

He is Crown Prince Abdullah, and you ought to dance a jig in his name the next time you you say, "Fill it."

He has made gas prices irrelevant in America.

Those of you in your 20s have no recollection of the last time they were this cheap. You weren't born.

Back in the mid-1960s, your mom and dad paid about 25 cents a gallon for regular.

Add inflation, jump forward 30 years, and you get an average price of $1.02 a gallon in the US - under a buck in many places.

Got that? Gasoline costs less than bottled water.

But you knew that. You're American. You think sport-utility vehicles are covered in the Constitution.

What you might not know is that prices should stay low and might even move lower.

Thank-you notes seem the appropriate gesture for your new best buddy, the crown prince.

The younger brother of King Fahd of Saudi Arabia, he has been running the show while the king is ill. Part of the job is helping members of OPEC (the Organization of Petroleum Exporting Countries) keep a lid on the oil they pump - just enough to keep prices near $23 a barrel.

Oops. They're now at $14 because some OPEC "cheaters" are shipping more oil than promised. Venezuela reportedly sneaks an extra 30 percent a day into the pipeline.

The result: a glut of the goo, and gas prices down 23 cents since August.

The world's biggest oil producer, Saudi Arabia, swings a lot of weight with prices. But even Abdullah and his army of oil wells can't do much to raise them, at least not right away. He has three choices to curb those cheatin' hearts.

1. Cut Saudi production to create an oil shortage and higher prices. Bad choice. Saudi Arabia loses market share.

2. Threaten punishment by cranking open the Saudi spigot, flooding the markets with cheap oil.

3. Or he can just do it.

His brother, King Fahd, did it in 1986 when OPEC members failed to slow the flow of excess crude. The flood gates swung wide. Prices plunged near $10 a barrel, choking the cheaters' profits and returning them to the Saudi way to play monopoly: less oil, higher prices, more income, pass GO only on your turn.

In 1998, the cheating started again, and analysts expect a sudden counter-clockwise movement from the hand of the man with a grip on the handle.

But here's a wrinkle. Abdullah may have less control than usual. Six months ago, the smart girls and boys on Wall Street predicted ever-higher oil prices in the years ahead. They saw ever-expanding Asian markets consuming ever larger quantities of crude. But the economic gusher in Asia has been capped, for now, and an oil industry that had scrambled to fuel it now suffers from overcapacity.

It's not going away soon, which means oil prices may stay low for three or four months, maybe well into the summer.

You've read  of  free articles. Subscribe to continue.
QR Code to Bucking The Trend
Read this article in
QR Code to Subscription page
Start your subscription today