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Why Saudi Arabia Is On Our Side

Well, in terms of oil prices anyways. As FT Alphaville reports, Saudi Arabia "wants to bathe the world in affordable oil." On Thursday's OPEC meeting, Saudi Arabia and its Gulf state allies want the quota on oil raised, increasing the supply of relatively abundant oil coming from OPEC countries.

So why is Saudi Arabia sticking out its neck for more abundant oil? Simple. This is a textbook example of an oil state leveraging its oil-producing capabilities for, among others, political advantages on the international arena. As noted by oil watcher and economist Phil Verleger:

  • Lower oil prices will help convince Russia to cooperate with Saudi Arabia and the west on Syria
  • Lower oil prices will put increasing strain on Iran
  • Lower oil prices will help Saudi Arabia renew its membership in the G20

Of course, there are also various economic benefits, but this development goes to show that oil is just as much a political weapon as it is an economic weapon.