West Can Act to Reduce Oil Prices

A leading Israeli economist contends that the Western world, if interested, can bring about a cut in the price of oil. According to Prof. Haim Ben Shahar, president of Tel Aviv University and the author of the newly published book, “Oil: Prices and Capital,” the West can widen the already existing conflict between Saudi Arabia and the rest of the members of the Organization of Petroleum Exporting Countries (OPEC) and thereby create a situation in which the price of oil will be out or at least an increase avoided. The latter would mean a reduction in price because of inflation, Ben Shahar explained.

In an interview with the Jewish Telegraphic Agency, he explained that the conflict of economic interests between Saudi Arabia and the other OPEC countries is that Saudi Arabia is interested in lower prices for petroleum while the others, led by Iran, seek an increase in prices.

The reason for the conflict, Ben Shahar said, is because “Saudi Arabia has far more reserves of oil and a great amount of surpluses in petro-dollars compared to the Iranian group. A reduction in price will increase Saudi Arabia’s revenues because of greater demand for oil. Because of its vast amounts of oil Saudi Arabia will be left, therefore, with tremendous amounts of money in the course of the next 15 years.”

The West can widen the conflict between Saudi Arabia and the rest of OPEC by giving Saudi Arabia, which is accumulating petro-dollar surpluses, insurance against inflation and by helping that country to increase its oil production. Ben Shahar, said. Whether there will be a rise in oil price or not, Israel will find itself in an awkward situation, Ben Shahar said. A price hike will increase Arab revenues while a cut in prices will increase the dependency of the West on the Arabs.