US Preparing to Bring down Oil Prices

Representatives of the Republican and Democratic factions of the US Congress have agreed to lift the embargo on US oil exports, Bloomberg reports. According to Republicans, the decision puts the United States on top of the world’s energy politics. The Democrats, who previously protested against the decision, have agreed under the condition that several laws on tax incentives for clean energy producers be abolished. Following the adoption of the new law lifting the embargo by the both factions of House of Representatives on Wednesday, it is to be voted as soon as Friday and will be sent to the Senate and then to the President.

Economic basis

The decline of global oil prices has put American oil production companies at a disadvantage. The influx of cheap foreign oil to the United States has forced American producers to significantly reduce prices. In order to balance pricing policies, it is necessary to enter world markets. In addition, the oil lobby is afraid of a cheap oil influx from Iran which could compete with US oil.

However, such a strategic decision cannot only be the result of economic considerations. In the 1990’s, during the period of cheap oil, the United States did not decide to remove the embargo imposed in 1975. Something has to have changed in the international situation.

Geopolitical reasons

The main geopolitical enemy of the US is, as always, the Heartland power, Russia. The Russian budget and military spending in particular have increased over the course of the operation in Syria, plus they are too dependent on oil prices. Thus, a reduction in oil prices is a tool for strengthening US geopolitical dominance. In addition, American strategists have traditionally pinned their hope on the impact that a change in the balance of oil prices would have on the Russian state system.

Some Western analysts have pointed to the close connection between geopolitics and energy policies using the term “Petropolitics” (In Latin: Petroleum = oil). Thomas Friedman in particular has elaborated the so-called first law of Petropolitics that can be applied to non-Western oil-producing companies. It can be described as the following:

The higher that global prices for crude oil are, the stronger an illiberal state system in a country becomes. Conversely, as oil prices fall lower, Petro-states move closer towards a liberal political system.

Earlier in 2013, the idea of lifting the oil embargo was lobbied by the globalist Council on Foreign Relations.

The issue of the Middle East

Middle Eastern oil prices are significantly lower than Russian ones. However, the US decision could seriously impact the policies of this region’s states. The United States believes that Saudi Arabia, Qatar, and the United Arab Emirates should be kept on a leash. Despite the fact that the US supported the Gulf states in aggression against Yemen and, at the same time is fighting with them in Syria, the increasing importance of these states in the international arena creates an illusion of their independence. The US is entering the world market in order to gain an additional tool for influencing these countries’ policies.

Oil prices as a tool of influence

In entering the game of pricing policies on the oil market right now, when all oil-producing countries are demonstrating their influence on oil reserves, the US is becoming a key player. Now, they can and want to determine oil prices. Whether or not the decision is made to lift the embargo will decide how much oil is to be sold on the international market. Even if the amount is small, the United States will nonetheless obtain an additional tool in influencing the Petro-states. This is an argument in negotiations and a tool for the destruction of some countries’ economies, including that of the US’ key rival, Russia. Of course, such a tough action by the US might have certain expenses, including the collapse of the shale oil production project due to being too expensive and insufficiently profitable. Nonetheless, the very willingness to do so or not will show the state of American foreign policy and how seriously the Russian threat is taken.

Forecast

Thus, the decision that Congress will make and whether or not it will be vetoed by Obama will show the readiness of the US to start an actual war with Russia, for now using non-military means. The decision to lift the ban on crude oil exports will most likely, as a result of backroom negotiations, be accepted and President Obama will not veto it. Thus, in the context of the growing conflict between the United States and Russia, the US will attempt to defeat Russia on the economic front and thereby make conditions which would force it to change its geopolitical course.