US will see increased leverage resulting from lower oil prices
Tom Friedman notes in his column today that plummeting oil prices have created a radically new geopolitical situation in the world.
Have you seen the reports that Iran’s president, Mahmoud Ahmadinejad, is suffering from exhaustion? It’s probably because he is not sleeping at night. I know why. Watching oil prices fall from $147 a barrel to $57 is not like counting sheep. It’s the kind of thing that gives an Iranian autocrat bad dreams.
Where petro-financed states like Iran and Russia could previously afford to project their will throughout their regions with sky high oil revenues, in the current market they will be forced to scale back not only on their geopolitical ambitions, but also their domestic ones.
Under Ahmadinejad, Iran’s mullahs have gone on a domestic subsidy binge – using oil money to cushion the prices of food, gasoline, mortgages and to create jobs – to buy off the Iranian people.
The Iranian government is now facing a situation where they cannot afford to continue their aggressive foreign policy vis-à-vis Hezbollah, Hamas, Syria, and the Shiites in Iraq. Friedman notes that this will give our next president much more leverage in dealing with them.
Of course, we’ve said it before, and we’ll keep saying it, all of this just drives home the importance of recreating these conditions in the future through a comprehensive energy policy that will cause a long-term decrease in the demand and price of oil.
[Update: Energy Outlook adds some insight to this issue, noting "as global demand for oil slows and its price sinks toward $60 per barrel, the effectiveness of Iran's implied threat to suspend oil exports in response to aggressive sanctions or a military strike on its nuclear facilities also erodes."]
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