Obama Wins the Oil Price War against OPEC

Far removed from the justifications provided by the International Energy Agency, which has attributed its decision to reduce Libyan oil production to the local unrest, observers of the decision to release oil from emergency reserves — a decision that China supported, expecting it to lead to stability in oil prices — will have noticed a strong correlation between this action and the obvious decline in the U.S. economy and President Obama’s popularity. Obama currently intends to secure a second term in office. He stands a better chance if there is a drop in oil price and an improvement in the U.S. economy, a position that was confirmed by the Secretary of the Treasury Tim Geithner. Geithner said in a statement to the press that the decision will provide a little support to the American economy in addition to Obama’s extensive efforts to curb speculation and risk appetite in the oil market, hopefully bringing about a certain extent of stability.

For its part, OPEC considers the International Energy Agency’s move unjustified. I don’t see any need for it either since the price of oil has not reached $150 a barrel. As a result, there is no need for this step since the market is not experiencing a shortage. Moreover, Saudi Arabia and Kuwait have raised their production despite the fact that there are not many buyers. I believe that the International Energy Agency has made a political move to help the United States.

Naturally, oil markets have been affected by this decision and the price of crude fell below $100 a barrel. I expect the price of oil in the third quarter of this year to drop by more than $20 against earlier estimates.

In the game of interests, Washington remains the biggest winner in the decision to release oil from emergency reserves as this paves the way for it to influence decision making in the International Energy Agency in the interests of the U.S. economy. The markets are concerned about the consequences that the tug of war between the two sides may cause, which would reflect on the fragile relationship between producers and importers in this atmosphere of global insecurity over the economy, especially since papers and standards have been mixed up to a large extent as well.