Why Oil Prices Didn’t Skyrocket After the Attack on the Saudis

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RUSH: The Wall Street Journal is reporting that the attack on Saudi Arabia’s oil infrastructure last weekend took about half of the kingdom’s production capacity. That’s not insignificant. Half of the Saudi production capacity? I read it was 5% of the supply. But 50% of the production capacity, that’s a different thing.

But guess what? In the immediate aftermath everybody thought that the market would plummet in panic and that the price of oil would skyrocket to over a hundred dollars a barrel. Guess what? That didn’t happen. Do you know why? There’s a very, very simple, logical economic reason for this.

Markets recognize that Saudi Arabia and other members of OPEC are gonna have to curtail their production one way or the other to make room for the explosion of U.S. oil production. Because if they don’t, prices are gonna collapse. See, the United States, because of fracking, we’re now independent. We don’t need to import any oil from anywhere, Saudis, anywhere else.

Now, we’re still vested in their defense. Their oil is still needed around the world at market prices. The free flow of oil at market prices is the number one factor in a stable economy in this country and most of the western democracies. You might not like hearing that, but it is. It’s why when Saddam Hussein went into Kuwait, threatened to shut down the oil and take it all over, we didn’t waste any time. George W. Bush dispatched troops. We could not allow that to happen.

The free flow of oil — I don’t care what the climate change ninnies say. I don’t care what the anti-fossil fuel crowd says. The world functions on the free flow of oil at market prices. Any interruption is a potential disaster. Any oversupply depresses prices. It’s a delicate balance. There’s tons of it. The challenge with the supply of oil is meeting the demand without creating a whole bunch of surplus. It’s a logistics problem. It’s a pleasant one to have.

So with the United States production rising, the Saudi production, OPEC’s production is gonna have to be cut because the world supply is what it is. The world demand is what it is. If the U.S., because of the dominant position we have, sets the price, the Saudis are gonna have to accommodate. So they might have been looking forward to cutting back production anyway. If they didn’t, prices would collapse because there’d be way more supply than the world needed.

So the bottom line here is that instead of a disaster, if this had been 20 years ago, it would have been a disaster. We would have been up a creek. There would have been panic. There would have been gas lines already. There would have been a contrived shortage. The panic, you would not have been able to deal with it. It would have been created in media story after media story. But it’s a blip. It’s a blip because of fracking. It’s a blip because the United States is now self-sufficient and has so much we can export, making the United States the real winner.

Riyadh, which is the Saudi capital, is gonna have to do what they have to do to support prices at the same time we’re taking the lead as the world’s largest and fastest growing oil producer. And, by the way, none of this happened because of Barack Hussein Obama, the Democrats. They were trying to shut fracking down. They didn’t want the pipelines built. They didn’t want any of this to happen. But it did in spite ’cause Trump gets elected and what’s the first thing he does? Opens up all those pipelines, tells the environmentalists to go pound sand or wherever they pound whatever. Pipelines are open, new drilling is planned, fracking goes on, prices come down. It’s magical how this theory actually works in practice.

Back to the phones. Thomas, Vero Beach, Florida. Glad you waited, sir. Hello.

CALLER: Sir, what’s your take on Trump’s walking backward on Iraq? [sic] First, he was locked and loaded. And Tuesday he doesn’t want war. Today just a while ago on Fox, maybe more sanctions. What’s that all about?

RUSH: Are you talking about Iraq or Iran?

CALLER: I’m saying Iraq. [sic]

RUSH: So you’re asking me what I think of Trump walking back on Iraq?

CALLER: Excuse me. I misspoke. Iran. Iran. Iran. You’re right. Iran.

RUSH: The reason I’m asking is because I’ve got a sound bite here that I — let’s see. Yeah, grab sound bite number 24. I’m gonna play the sound bite, and you tell me what you think of this. Okay?

CALLER: Okay.

RUSH: This is Trump this afternoon in Los Angeles at the airport before he got on Air Force One to get out of there. He was with his new national security adviser, Robert O’Brien. They were both talking to reporters. And a Democrat in the media, a reporter said, “Mr. President what are the options that you are considering? You just said there were some very bad things were thinking of regarding Iran?”

THE PRESIDENT: There are many options. As you know, there are many options. And there’s the ultimate option and there are options a lot less than that. And we’ll see. We’re in a very powerful position.

REPORTER: Are you considering…?

THE PRESIDENT: Right now, we’re in a very, very powerful position.

REPORTER: When you say, “the ultimate option,” are you talking about…?

THE PRESIDENT: No, I’m saying the ultimate option meaning go in, war. No, I’m not talking about… I’m not talking about that ultimate option, no.

RUSH: So Trump leads these guys into believing he’s thinking of maybe of nuking them, and then walks that back and then makes ’em think he’s maybe thinking of going to war with them. “Oh, no, no. I’m not talking about that. I’m talking about another ultimate option. They’re all out there scratching their heads. Now, is this what you mean by walking forward and walking back, being aggressive and then backing up on it? Is that what you mean?

CALLER: The first response should have been to destroy them for knocking down our drones. They don’t care about sanctions. All they want is war, and that’s the only thing we’re gonna talk to them with.

RUSH: So you think Trump ought to just unload on them?

CALLER: Absolutely!

RUSH: Do you think he will?

CALLER: No. He’s walked backwards.

RUSH: And why do you think that…? I’m not trying to set you up. There’s no wrong answer, here. I honestly want to know what you think. Why do you think he’s walking it back?

CALLER: Well, first he said he was locked and loaded. What’s that say to me? That says to me, “My guns are ready,” and then he says, “I don’t want war.” That’s walking backwards.

RUSH: I think it’s also keeping them off balance. I think it’s also… Trump looks at them as a bunch of mad men, the same way he looks at that potbellied dictator in North Korea. I think he tries to talk their language: Huff and puff, then walk it back, then huff and puff. Remain unpredictable and keep them on defense. Going to war with Iran, that would be a serious thing. Has it been firmly established…?

Mr. Snerdley, you would know. You’ve been following this. Has it been firmly established that the Iranians did provide those drones to the Houthis and they were launched, in fact, from Iran? Is that what’s been…? (interruption) Okay. The Saudis are now saying the Iranians did it. So the Iranians launched the drones from their territory, and the Houthis in Yemen are getting the blame for it, but it was the Iranians who did it.

Well, it’s gonna come to a head at some point. It’s been going to come to a head with Iran at point for a long time. I mean, we didn’t do anything when they took our hostages back in 1978, ’79, whatever it was. It’s a trigger that, once you pull it, it’s hard to un-pull it. So the best I can tell you (and I don’t really know) is that it’s just an effort to keep ’em off balance, to not know what’s really coming — and don’t forget this. The Iranians have allies in this country. They’re called Democrats.

You’ve got a bunch of people from the Obama administration like John Kerry, who was secretary of state. They are still seething that Trump walked back that Iranian nuclear deal. We’ve got a lot to deal with when it comes to Iran. There’s some former Obama administration officials who are actually privately counseling the Iranians on how to deal with Trump, like Teddy Kennedy did with the Russians — the Soviets — during the Reagan administration. I understand your frustration.

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