Category: Coincidences

US is an oil consumer. It does produce oil but it’s mostly viable in times with high oil prices which is anyway detrimental to its current consumption based industries.

Apparently, the US is not happy with the nuclear sanctions’ deal with Iran and withdrew from it, asking for more stringent terms while also accusing it of not complying with the terms of the earlier sanctions.

These are the statements made by this country. Statements are just that and may not be the actual truth.

 

The coincidence:

How is it that by simply imposing the sanctions on Iran, and urging/threatening others (EU, India, etc.) with doing the same, it has effectively secured a bigger share of the world’s oil consumption for its long time ally – Saudi Arabia while also keeping the prices low for itself.

The Saudis, whose margins have been hit due to low oil prices have been wanting higher prices. An increase in volumes gets them the higher profits they desire while keeping the margins and prices low. Higher profits for Saudis also mean greater sales for US manufactured defense equipment for which Saudis are a big customer.

Many might argue that since the US is such a big producer of oil (the biggest producer as of this post), would it not benefit from higher crude oil prices? The truth is, while it is the biggest producer of oil, it also is its biggest consumer. President Trump has also complained of high fuel prices from time to time. High oil prices raise the input costs for a lot of industries (plastics for example) and also have other effects (logistic costs and vehicle sales for example). The low prices help the US industries that consume oil or are indirectly affected by high oil prices.

Win-win while making Iran look like the bad guy.

 

Update (20/11/2018): When this lead to the oil price shooting up, the US gave sanction waivers to a few countries, reducing the demand pressure by a little bit (bringing the oil price in control).

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