‘Oil price shock!’

I look frequently at the price of West Texas crude, and the ‘shock’ is a pleasant one(which is why it has been under-reported in the media); the price has fallen from its high of around $140 to just over $80.It bounced back to $90 on the forecast of a tropical storm in the Caribbean which could disrupt supplies., but this is a speculative blip. Brent has fallen nearly $40 from the year's high and  U.S crude has dropped $33 from its 2012 high of $110.55.

Our petrol price, amongst the highest in the UK when it peaked a £1.99 a litre, is now down to £1.44 and falling. If this continues through the summer, when demand is least, we should save a lot on our next consignment of heating oil (which is much reduced anyway because of our winter escape plan).

Why is this happening, apart from seasonal factors?

Pretty complex.

The US has been building up its reserves that now stand at the highest stocks since 1990.

In the market, Saudi is calling the shots. Venezuela, Iran and Nigeria, the naughty boys in the OPEC club, want Saudi to cut output. It is currently 1.6 million barrels a day above quota. They need a price well in excess of $80 to meet their commitments. The Russians need about $90 to stay out of trouble.

The Saudis are not playing ball . What a shame!

A main consideration is that the Saudis don’t want a global recession that would hammer oil prices, not least because of the impact on their massive Western investments.

Then there is the anticipated market effect of removing up to 700,000 barrels per day with the imposition of the EU embargo on Iranian oil from 1^st July. Saudi has a strong strategic interest in ensuring that the EU does not go soft on its regional rival.

Switching to the US, its success in reducing reliance on Gulf imports has been sensational. It now imports only 45% of its oil requirements, and its reserves of oil and gas are rising rapidly. Gas prices are at probably an all-time low.

So what’s the problem?

In a word, Obama. Apart from his being wedded to green politics, it is beyond me why O has persistently tried – often successfully – to frustrate measures to reduce America’s energy dependency on imports. He has shown extreme reluctance to grant permits for on-shore and off-shore drilling. He has refused to give the go-ahead to pipelines to carry Canada’s huge quantities of shale oil to the US. He has stymied exploitation of Alaskan deposits, presumably at the behest of the Friends of the Caribou, since the population is so sparse as not to notice.