Saudi Arabia: Using Capacity to Keep Iran at Bay

As a close follower of foreign affairs, I love it when sourcing and procurement topics overlap with global economic policy. So you can imagine, I found it fascinating when I read in Supply Chain Digest that Saudi Arabia might be using its oil reserve capacity to keep crude prices low as a blocking and tackling move designed to limit Iran's power in the region. According to the short piece, "Oil industry experts are suggesting that a factor in the drop in oil prices over the last few months has been Saudi Arabia's desire to blunt Iran's growing power in the region by reducing the country's oil revenues ... Many observers suggest that Saudi Arabia, the world's largest producer of crude, is content to let prices fall in the short term to deprive Iran from further bolstering its financial resources, which it uses in part to grow its own military strength and that of allies such as Hezbollah in Lebanon."

Personally, I find this quite interesting. But one wonders how much the US Government's close relationship with the Saudi Royals is behind this policy (if it is in fact true). Procurement organizations should take note that a continued drop in oil and energy prices from Saudi policy decisions like this will have a positive impact on reducing related commodity costs (e.g., foam, resin) as well as transportation costs.

Jason Busch

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