Amid Iran Crisis, Would Cut Costs
Sen. Charles E. Schumer called on the U.S. State Department to press the government of Saudi Arabia to publicly and unequivocally promise to increase its oil production to compensate for any Iranian attempts to embargo oil and upset world markets.
In light of Iran’s decision to cut off oil exports to France and the United Kingdom, and the threat to further expand its embargo oil exports, Schumer called for the State Department to press the Saudis to make explicit commitments to make up any losses of Iranian oil to the world market, to help reduce already sky-rocketing gas prices.
With the average price of gas at $4.02 in New York City, $3.99 on Long Island, $3.94 in New York State, and $3.69 per gallon nationally-almost exactly double 2009’s average of $1.86-continued high gas prices have the potential to dramatically drag down the US economic recovery and put a severe strain on American families’ budgets. Rising fuel prices are directly linked to the global energy market, particularly Iran’s recent efforts to manipulate oil prices.
Iran produces roughly 2.2 million barrels of oil for export, and current production in Saudi Arabia is at approximately 10 million barrels, 2.5 million below its 12.5 million barrel capacity.
“While Iran plays games with oil production to punish the international community for holding them accountable for their rush to develop nuclear weapons, Saudi Arabia has the capacity to blunt Iran’s influence by increasing its production levels to capacity,” said Schumer. “If there is one thing that the United States and Saudi Arabia have in common, it’s the understanding that Iran is a destabilizing influence in the Middle East and the world. We can calm markets and lower gas prices, while at the same time curtailing Iranian influence, by increasing Saudi production. I am urging the State Department to work with the Saudi’s and press them to bring their oil production to capacity to replace Iranian losses.”
The price of diesel fuel has also increased, reaching $4.02 a gallon, nationally. The price of diesel fuel not only affects truck drivers, but it pushes food and transportation costs higher, hitting consumers not only at the pump, but at the grocery store as well, Schumer noted.
The combined effect of these energy prices has the potential to significantly undercut the U.S. economic recovery, the senator pointed out. These skyrocketing fuel prices are directly linked to the global energy market, particularly Iran’s recent efforts to manipulate oil prices.
Saudi Arabia, according to the U.S. Energy Information Administration, is averaging 10 million barrels of oil per day-2.5 million barrels short of their approximate 12.5 million barrel capacity.
These lower production levels have a negative impact on global markets. When paired with recent actions by Iran in halting sales to French and U.K. companies and threats to stop sales to countries such as Italy, already fragile markets are being further devastated.
These shifts are now hitting Americans at the pump, Schumer said, reverberating throughout the rest of the economy, and threatening the U.S. recovery.
Schumer also urged the State Department to press Saudi Arabia to act unilaterally, if necessary, to ensure that OPEC nations like Venezuela and Iran do not attempt to block further exports. Saudi Arabia has in the past acted without OPEC.
Last June, when Saudi Arabia announced that it would increase its oil output by 1.5 million barrels, the price of a gallon of gas dropped 6.6 cents from the week prior to the announcement. If the same pattern holds from last June, a 2.5 barrel increase could conceivable lead to an 11 cent drop in the price of a gallon of gasoline.
In his letter to Secretary of State Hillary Rodham Clinton, Schumer urged the State Department to work with the government of Saudi Arabia to increase their oil production in order compensate for the loss of oil from Iran. Schumer said that by increasing production to capacity levels, Saudi Arabia could calm oil markets, promote the shared goal of reducing Iranian influence, and ultimately reduce prices at the pump for Americans.
