Do The Saudis Engineer The Oil Crisis?

The dramatic fall in oil and gas prices is perhaps controlled by Saudi Arabia, as CNN reports. The U.S. government officials feel that the Saudis engineer the oil crisis. The head of the Dallas Federal Reserve, Richard Fisher, speaking at the Economic Club of New York, stated that the Saudis now realize the massive growth of the U.S. oil industry in the recent times and although it has taken them a while to realize that, they have plunged the oil from over $100 a barrel to below $50. Often, the Saudi officials have blamed supply and demand for the recent setback in the prices.

As KSPR reports, the recent fluctuations have been placing a lot of pressure on U.S. shale. The only positive side effect would be to see shale oil production companies running out of business, as stated by members of the Saudi royal family, who are also prominent global investors. The games on oil started at the end of the summer when one saw the oil prices diving. According to Richard Fisher, the Saudis benefit both politically and economically from the decline in oil price. The lowering oil prices are going to hit Iran the most, their biggest regional rival. Iran's economy heavily depends on oil and the Saudi have much bigger cash reserves to withstand a downturn in prices, even for much longer time.

Saudi Arabia, at present, stays motivated to keep prices low right now and thus, one doesn't expect oil to shoot up in the coming months anytime soon. The Saudis cash reserves can well handle the fall in oil prices, but other countries like Iran cannot. Already, many energy companies are cutting down on their spending and laying off workers. In U.S., the economy has diversified and is not completely reliant on oil.