While crude oil prices are rising a bit today due to an oil storage fire in Libya, the recent plunge in prices has many wondering just what is behind the Saudi oil price war?
Is it possible that the real target may be U.S. President Barack Obama? While it is clear that the drop in oil (NYMEX:CLG15) price is having a devastating impact on Russian economy and is not doing Vladimir Putin any favors, the Saudi actions really seem to be directed at the U.S. shale and alternative energy market and perhaps to spite the U.S. president.
President Obama has been silent on what seems to be an economic attack on U.S. economic interests. The President that spent billions on green energy projects and assumed credit for the U.S. energy revolution has not commented on what amounts to oil dumping on the U.S. market. The Saudis are not even trying to hide the fact that the U.S. is their main target as they are offering lower prices to U.S. customers than customers in Asia and Europe.
Under President Obama's relations with the Saudi Arabia are at all-time lows. Not only are they upset about the President's overtures towards Iran, they also harbor resentment of the President's failure to follow through on his red-line in Syria and his support of the Muslim Brotherhood in Egypt.
The Saudis feel basically that President Obama had abandoned them time and time again. They are uneasy when the U.S. negotiates with Iran as Iran causes havoc in Iraq and Lebanon and Saudi's neighbor Bahrain. They can't trust a president that says that he is going to attack Syria for using chemical weapons, asks for their support that minute pullback and then backs out. Is it any wonder why the president hasn't called the Saudis out for attempting to sink one of the major bright spots in the U.S. economy? It is because they wouldn't listen to them.
Yet, oil is fining a home regardless near $55 dollars. The market is wondering that Libya's oil exports could be halted as fighting in key oil areas is continuing. The AP and Bloomberg is reporting that fires have been extinguished at three of five tanks at Es Sider, Libya's largest oil port, which were set ablaze after an attack by militants, said Ali al-Hasy, a spokesman for the Petroleum Facilities Guard.
We also are hearing pleas from Algerian Energy Minister Youcef Yousfi called on the Organization of Petroleum Exporting Countries to cut production. I don't think the Saudis will listen to them either.
In the meantime, job cuts and capital expenditure cuts are starting to take hold in the U.S. energy sector. The Wall Street Journal reported that one company caught in the industry downturn is Hercules Offshore Inc. The Houston-based firm is laying off 324 employees, roughly 15% of its workforce, because oil companies aren't renewing contracts for its offshore drilling rigs in the Gulf of Mexico while crude prices are depressed. "It's been breathtaking," said Jim Noe, executive vice president of Hercules, which was founded in 2004. "We've never seen this glut of supply and dislocation in oil markets. So we're not surprised to see a significant decline in demand for our services."