Sunday, October 12, 2014

The Saudis and their oil

Oil prices are falling, yet the Saudis are pumping more.

Some believe the Saudi's are trying to preserve market share. Others suggest it's part of a strategy to force oil prices down, one designed to dove-tail with Western sanctions to punish Russia which depends on commodities like oil to fuel its economy.

But maybe it's more simple than that.

Maybe those now running Saudi Arabia are panicking over ISIS.

ISIS flags were seen flying in Mecca during this year's Hajj gathering.

If Saudi royals have any concern at all that ISIS, or some fundamental force like it, might threaten their rule of the kingdom, they might be motivated to start converting more oil to cash or gold.

Cash can be used to fund a home front war with ISIS if things come to that. Pumping more cash into the Saudi economy might also be a way to score additional popularity points at home for the present government.

Cash or gold is also something the royals and their loyalists could take with them in a hasty exit if ISIS were seen as having potential to depose the present Saudi regime.

Gold prices are down along with oil, so the downside of pumping now is diminished if the Saudis are intending to invest in more gold after converting more oil to cash.

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