 As the Saudis drop their prices, Americans will feel less pain at the pump.
Saudi Arabia last decided to teach the world a lesson in oil politics in 1973 through 1976. The lesson was you don't mess with the oil producers if you want energy.
The 2014 version of the lesson is that Saudi Arabia is only one nation can play the oil card. There will be no room for upstarts and no tolerance for alternative energies.
Over the past 100 years, the Saudis have learned a lot from the West about geo-power politics and how just fragile western civilization is where energy is involved.
In the 21st Century poker game of oil, the Saudis have the best hand. Some would venture that they have the only hand in leveraging world markets for oil.
Saudi Aces in the Hole
1. A nation that came from out of the desert has a heritage of tribal politics. There's a different mindset than Western nations.
2. Saudi Arabia can produce crude oil at $ 4.00 to $ 12.00 a barrel.
3. At $20.00 a barrel, they make a profit.
4. The Saudis are thought to have a war chest of somewhere between $800 and $ 1,000 billion to survive a global oil market collapse. They can go some time without making a profit on their oil.
Why Now? ...Punishing OPEC
1. The United States just passed Saudi Ababa in production of oil with its 18 million barrels a day as compared to the 12 million barrels a day for Saudi Arabia.
2. The U.S. is developing totally new sources of energy - fracking shale oil, natural gas deposits. Also importing new oil reserves from Canada.
3. Relatively new players are flooding the market with oil. Upstarts Russia, Nigeria, Venezuela, Iraq, Syria and Libya based their budgets on $100 - $110 a barrel. They are now hurting.
The Saudis have a winning hand in the game right now. It will take concerted efforts of the affected countries to counter them. Considering the players involved, that ain't gonna happen.
We predict by February 2015, the Saudis will drop their price to between $20 and $30 a barrel. Gas prices at the pump will drop to $1.50 - $1.75.
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