Low gas prices come with a catch for country
March 23, 2016
If you drive a car, if your parents drive a car, or if you listen to the news ever, then you’ve probably heard that gas prices are low and getting lower. Something that you may not know, however, is why prices are getting so low. The low trend can be traced to one region, The Middle East. More specifically, it can be traced to Saudi Arabia.
This price drop may be good for the gas consumer as the national average price per gallon of gas is about $1.75. However, as with most seemingly good things, gas being so cheap has some problems.
Currently, the United States is trying to become the dominant source of energy for the world. According to Texas Republican Rep. Joe Barton, the United States has the best technology and the best oil.
“We will drive out Russian oil. We will drive out Saudi, Iranian [oil],” Barton said.
This is where the problem comes into play.
In the January Organization of Petroleum Exporting Countries (OPEC) meeting, Saudi Arabia declined to cut oil production despite the current surplus.
Going against the rule of supply and demand, the Saudis will keep pumping.
Why?
Iran has been expanding its influence across the Middle East and even attacked the Saudi embassy in Tehran, so Saudi Arabian and Iranian relations have been tense. But, the head of the Foreign Relations Committee of the Supreme National Security Council of Iran, Seyed Hossein Mousavian, said that “[he doesn’t] believe there will be a war.”
Tensions still exist, and the two countries hold among the top four proven largest oil reserves in the world, along with Canada and Venezuela.
In addition, Saudi Arabia depends on its oil exports. Eighty-five percent of its revenue is based on exporting oil. Many analysts believe that Saudi Arabia sees the writing on the wall that oil production will soon be replaced by more eco-friendly alternatives.
They would rather drill now and get what money they can than not drill the oil.
As Saudi Arabia’s former oil minister Ahmed Zaki Yamani said, “The stone age did not end because the world ran out of stone.”
In terms of how this will affect the United States, Saudi Arabia’s excessive pumping causes a surplus of foreign oil. With the surplus, U.S. production will slow, and states like North Dakota and Alaska are “feeling the pinch,” according to North Dakota Republican Rep. Kevin Cramer.
The game changers in this issue will be technological advancements, how low gas prices can go and for how long, and how relations between Saudi Arabia and Iran evolve.
If Saudi Arabia and Iran can come to an agreement about Iran’s expansion, hopefully relations between the two countries improve. However, the religious divide that separates the two cannot be fixed with forced diplomacy.