Source – ultraculture.org

– The recent drop of gas prices has come as a blessing to consumer. However, it also comes as a result of a geopolitical headache.

On Columbus Day, gas prices in the United States dropped to an average of $3.20—the lowest that they have been for the holiday in four years.

International Business Times reports:

The price of regular unleaded gas has dropped steadily since June, but saw a particularly sharp drop over the last month. Columbus Day’s average price is 9 cents less than one week ago and 20 cents less than one month ago, according to a AAA report.

Gas prices have already dropped below $3 a gallon in many states, with Missouri the lowest at an average of $2.877 per gallon, reports OilPrice.

The decline in gas prices are directly linked to the drop in crude oil prices. From OilPrice:

On Monday, Brent crude futures dropped further to $87.74 a barrel—the lowest level since December 2010–while WTI futures were down to $84.68 a barrel. Saudi Arabia, for its part, has suggested it could handle $80/barrel prices. On Tuesday, Brent crude prices slipped further, to $87.03.

Kuwait has said that it has no plans to cut output and predicted that prices could drop as low as $76 a barrel before winter. And fellow OPEC member Saudi Arabia can “clearly survive a couple more months of low oil prices.”

The price drop is the result of number of factors. Europe and China have been slowing down economically. In addition to economic slowdowns abroad, the US has become one of the world’s biggest oil producers, thanks to fracking. The US has also threatened global oil markets by allowing some of its newfound oil to be exported—and Saudi Arabia has refused to cut back its production so as to keep prices higher, and instead chose to maintain its market share against other OPEC producers.

Some analysts have even suggested that there could be more cloak-and-dagger geopolitical manipulating behind the price of crude oil. In an op-ed piece for The New York Times, Thomas L. Friedman writes:

One can’t say for sure whether the American-Saudi oil alliance is deliberate or a coincidence of interests, but, if it is explicit, then clearly we’re trying to do to President Vladimir Putin of Russia and Iran’s supreme leader, Ayatollah Ali Khamenei, exactly what the Americans and Saudis did to the last leaders of the Soviet Union: pump them to death—bankrupt them by bringing down the price of oil to levels below what both Moscow and Tehran need to finance their budgets.

[…]

The net result [of declining oil prices] has been to make life difficult for Russia and Iran, at a time when Saudi Arabia and America are confronting both of them in a proxy war in Syria. This is business, but it also has the feel of war by other means: oil.

Russia has taken notice of the declining oil prices. Their state budget for 2015 requires that price of oil is at least $100 a barrel. In April, the Russian newspaper Pravda ran an article with the headline, “Obama Wants Saudi Arabia to Destroy Russian Economy.” It read:

There is a precedent [for] such joint action that caused the collapse of the U.S.S.R. In 1985, the Kingdom dramatically increased oil production from 2 million to 10 million barrels per day, dropping the price from $32 to $10 per barrel. [The] U.S.S.R. began selling some batches at an even lower price, about $6 per barrel. Saudi Arabia [did not lose] anything, because when prices fell by 3.5 times [Saudi] production increased fivefold. The planned economy of the Soviet Union was not able to cope with falling export revenues, and this was one of the reasons for the collapse of the U.S.S.R.

In the face of dropping oil prices and sanctions over Ukraine, things might seem bleak for the former superpower. But recent deals with China could mean that things are not so grim for Russia. In an excellent piece published on the Kremlin’s media outlet Russia Today, Pepe Escobar speculates on the future of trade between the two nations:

Russia, meanwhile, slowly but surely looks East. China’s Vice Premier Wang Yang has neatly summarized it: “China is willing to export to Russia such competitive products as agricultural goods, oil and gas equipment, and is ready to import Russian engineering products.” Couple that with increased food imports from Latin America, and it doesn’t look like Moscow is on the ropes.

A hefty Chinese delegation led by Premier Li Keqiang has just signed a package of deals in Moscow ranging from energy to finance, and from satellite navigation to high-speed rail cooperation…

The central banks of China and Russia have just signed a crucial, 3-year, 150 billion yuan bilateral local-currency swap deal. And the deal is expandable…

This new deal, crucially, bypasses the US dollar. No wonder it’s now a key component of the no holds barred proxy economic war between the US and Asia. Moscow cannot but hail it as sidelining many of the side effects of the Saudi strategy.

Escobar also writes that Beijing will receive arms from Russia: S-400 missile systems, Su-35 fighter jests, a brand new Amur 1650, and components for nuclear-powered satellites.

In the same piece, Escobar also speculates that the oil price drop could be the result of the US diverting its military campaign against Assad in Syria toward defeating the Islamic State, in addition to deliberating a nuclear deal with Tehran which could spell disaster for the Saudis’ control of the energy sector. He writes:

Geopolitically, it gets juicier when we see that central to the House of Saud strategy is to stick it to Washington for not fulfilling its “Assad must go” promise, as well as the neo-con obsession in bombing Iran. It gets worse (for the Saudis) because Washington—at least for now—seems more concentrated in toppling Caliph Ibrahim than Bashar al-Assad, and might be on the verge of signing a nuclear deal with Tehran as part of the P5+1 on November 24.

On the energy front, the ultimate House of Saud nightmare would be both Iran and Iraq soon being able to take over the Saudi status as key swing oil producers in the world. Thus the Saudi drive to deprive both of much-needed oil revenue. It might work – as in the sanctions biting Tehran even harder. Yet Tehran can always compensate by selling more gas to Asia.

It boils down to this: the Saudis believe that they can force Russia to abandon its support of Syria, and the U.S. to scratch a nuclear deal with Iran.

“That smacks of desperation,” Escobar says.

http://ultraculture.org/blog/2014/10/20/gas-prices-geopolitical-saga/