Obama and Saudi Arabia accomplish what Europe Could Not

The global economy continues to grow, despite the gloom in certain developed economy stock markets.  And my regular readers know I was advocating for Europe to wean itself off of Russian energy exports in response to their outlandish policies in the Ukraine.

But low and behold, the combination of slower economic activity in the E.U. and Emerging Markets, combined with the rapid increase in oil production from the U.S., and Africa has led to a surplus of oil in the global market.  When Saudi Arabia, the only swing producer in OPEC, said they would not cut production, they drove the speculators, who have added about $20 to the price of oil for years, to sell their positions.  The result is $60 a barrel oil.

The positives:  Russia is suffering from their own strategy of (i) relying on energy exports rather than creating a diverse economy, (ii) using energy exports as a tool of foreign policy and (iii) mucking around with power politics in the Ukraine, who Russia signed a treaty with guaranteeing borders some 20+ years ago, that Russia has now reneged on unilaterally.

Iran is suffering from it's inability to give up its nuclear ambitions.

Venezuela is suffering from it's inability to manage itself properly.

I have no sympathy for any of these countries.  They have conducted themselves improperly and need to straighten themselves out.  The only thing any of these countries understand is power politics and they use energy exports to fund that.

The Negatives:  Saudi Arabis also understands the power of the market on creating competition for their oil.  They know if they keep the price low, both the Canadian Tar Oil Sands and some of the fracking fields will not be economic to keep drilling.  The low price will also retard alternative energy and fuel economy incentives.

So don't count on the current price of oil staying where it is for very long.  If Russia and Iran straighten up, there is some reduced production in North America, the growth in global GDP will cause the price of oil to rise.

But meanwhile, enjoy watching the power politics on a global basis.  It is certainly more entertaining then the War on Global Jihad, which reaches new lows in it's spread of anarchy.