Good News All Around!

Paying a bit more for gas lately, hmmm? Well, you should love this commentary from AME in the United Arab Emirates:

This week the Saudi Oil Minister Ali Al Naimi lands in Moscow to sign a historic energy pact and to forge a new relationship with the kingdom’s main rival as top oil producer.

It has to be said that Mr. Al Naimi is gaining considerable weight in many circles. Independent observers credit him with keeping the oil price at least $1 per barrel higher in recent years than it would have been without him.

High oil prices of the past three years leave Mr. Al Naimi with a personal prestige perhaps unrivalled since Sheikh Yamani in the 1970s. Now the winning of new friends and influence in Russia is on the agenda.

This is a typically clever move by Mr. Al Naimi. In order to keep Opec oil prices towards the top of their $22-28 per barrel range then more than a little cooperation from Russia will be required.

Pragmatic Russia may heed this call from Saudi Arabia. Russia pays around $7 per barrel in oil production costs, compared with Saudi’ $1-2 a barrel, and would be financially crippled if oil prices fell to $10 per barrel as they did in 1998.

But no sign of that today, as mounting resistance to US rule in Iraq is keeping world oil supplies tight. Indeed, if the tentative US economic recovery blossoms this autumn, oil prices could head much higher.

History never quite repeats itself, but the situation in today’s financial and commodity markets does bare more than a passing resemblance to the mid-1970s.

Of course, we’re all hoping for a return to the petroeconomic conditions of the mid-1970s. But wait … the outlook gets even better:

For readers of this column who have business interests in the Middle East, and that is the AME Info target audience, this is very good news. The late 1970s were a golden age in the Middle East and we are seeing a repetition of this scenario.

Conversely for Western markets this means inflation, a property crash, possibly another stock market crash and anemic growth.

Now it is possible that the many manifest geopolitical problems of the Middle East serve to undermine such a golden scenario. But there is nothing that says economic expansion can not happen under unstable conditions.

So are the happy hopes of AME and its Editor-in-Chief, Peter J. Cooper.

Interested in Mr. Cooper? Here’s his AME bio:

Peter J. Cooper was the launch editor of Gulf Business magazine in 1996, and is an award-winning British financial journalist with 15 years’ experience. He returned briefly to the UK last year to complete his first book, Building Relationships, The History of Bovis 1885-2000. An Oxford graduate, Cooper studied politics and economics with William Hague, now leader of HM Opposition. He was also a trainee in the European Commission in Brussels as a specialist in the economics of developing countries, and speaks French and some German.