First it went up—an expected reaction to the expanding anti-American riots taking place in the Middle East and Israel’s “hawkish statements.” Then, almost inexplicably, it went down—while the reasons for the increase remained intact.
Industry experts have come up with a variety of explanations as to why the price of crude oil suddenly dropped from “a four month high of $117.95”—with American gasoline prices at “the highest ever level for this time of the year”—to “their lowest in six weeks.” A wide range of reasons are offered: expiring futures contracts; doubts about the pace of global economic recovery; the restart of production, shipment, and refining following hurricane Isaac; a bigger than expected increase in US crude oil stocks; a decrease in the spread between WTI and Brent; improved vehicle-mileage standards; and even the fat fingers of a trader.
One week ago, when oil prices reached their current peak, Iran’s oil minister, Rostam Qasemi, said that crude oil ought to be at least $150 a barrel. The reason? “Current oil prices were not high enough to threaten the world economy.”
Make no mistake. The Arab world is well aware of the potential choke-hold the countries have on the “world economy,” and they like the control position. They enjoy it when American presidents grovel, and even bow. They know we have to come to them and press for more production every time the geopolitics—much of which they control—heats up the price of oil. Addressing the “highest ever,” “for this time of year” gasoline prices of $3.87 a gallon, the Financial Times states: “The White House is watching.” There are rumblings about a release from the Strategic Petroleum Reserve.