Declining oil prices and the new Middle East

If you are celebrating the declining price of gasoline at the pump, you might want to thank President Obama. Ironically, the glut of oil on the market is one of the unintended consequences of the president’s Middle East policies. And neither those policies nor the prices serve the national interest.

The common explanation for the glut of oil on the market is that the Saudis, with lower production costs, want to make shale oil uncompetitive. The Saudis are sacrificing profit margins to keep market share. 

{mosads}The Saudis have made an enormous investment in excess capacity and need to recoup it, so they are highly motivated to take on the shale industry. But the Saudis are motivated for yet another reason. 

Oil is the Saudi’s weapon. Their only weapon. The Saudis are concerned about Iranian expansionism in the region and Russia’s regional agenda. The Saudis believe, not without justification, that the Obama administration has sold them out to the Iranians. To weaken the Iranians and the Russians—with conceivably the world’s largest shale reserve—the Saudis are pumping oil to keep the lid on both their adversaries’ profits and market share. The Saudis can make money by recouping small marginal costs. The Iranians and Russians, facing much higher production costs, are being squeezed. 

In the absence of shale, the Saudis would still be dumping oil, for the strategic concerns are even more important than the economic ones. The Obama administration’s freeing of over 100 billion dollars of Iranian assets, which even Secretary of State John Kerry acknowledges will go to fund terror and chaos, is a betrayal of America’s traditional allies in the region. This applies not just to the Sunni Gulf States but also to the Israelis.

One highly visible consequence of this is Israel’s hiring the Chinese to build a railway from the Red Sea port of Eilat to the Mediterranean. The Red to Med passage would bypass the Suez Canal, which has become increasingly vulnerable to the presence of jihadis in the Sinai. There are obvious economic and strategic benefits to the arrangement. But Israeli Prime Minister Netanyahu is far more interested in building a relationship with the Chinese than any other consideration.

The Obama administration has precipitated a number of disasters in the Middle East, revealing itself as an unreliable and incompetent ally. This has fostered not only Israel’s search for new friends but also a de facto alliance between Israel and the Sunnis, who both recognize that the administration has transformed Iran into a lethal, expansive, ambitious regional power whose own interests have brought the Russians back into the Middle East as a significant player. 

So, when you next fill up your tank and find comfort in the extra savings, remember that reflected in the price of gasoline is an ever volatile and chaotic Middle East, one in which America has increasingly lost its credibility.

Miller is an emeritus professor of political science, University of Cincinnati, and a distinguished fellow with the Haym Salomon Center.