The Organization of the Petroleum Exporting Countries (OPEC) still cannot come to terms with cutting oil production at its latest meeting Doha, Qatar over the weekend.
This, despite months-long low demand for crude oil amid a weakening global economy that has led to a dramatic correction in oil prices — dropping more than 62 percent from its June 2014 high of about $107 per barrel to its current level of about $41 per barrel.
Crude oil inventories hit another record on April 8 at 536.5 million barrels, according to the U.S. Energy Information Administration.
The hang-up? U.S. and European sanctions against Iran have now been lifted thanks the Iran nuclear deal, and now Tehran is saying that intends to increase production, not decrease it. It is still trying to recover market share.
You can thank President Barack Obama and Secretary of State John Kerry, who foisted the deal upon the world in the first place. Now Tehran is hell-bent on flooding world oil markets even as prices are crashing.
To a certain extent, one can be relatively thankful that OPEC is in such disarray. After all, oil and thus gasoline prices are lower, right?
On the other hand, the nuclear agreement does nothing to stop Iranian enrichment of uranium, risking a nuclear arms race in the Middle East, the most volatile region in the world. When the agreement was reached in July 2015, Saudi diplomats were immediately saying that the deal green lights initiating their own nuclear programs.
So, not only is the agreement destabilizing the global economy, it is also destabilizing regional security.
Just one more reason to hate the Iran nuclear deal.
Certainly, Iran can produce as much or as little oil as it pleases, but the fact that the agreement reached between the Obama administration and Tehran is now playing a role in the global oil collapse — which is hurting U.S. producers particularly shale big-time — is undeniable. The irony is just too rich to ignore.
In the meantime, members of Congress continue to pretend they had nothing do with it when in fact it was Congress that overwhelmingly authorized the nuclear agreement via H.R. 1191.
The law provided that “any measure of statutory sanctions relief by the United States pursuant to an agreement [with Iran]… may be taken, consistent with existing statutory requirements for such action, if, following the period for review provided… there is not enacted any such joint resolution” by Congress disapproving of the deal.
The period of review was 60 days. Meaning, when Sept. 17, 2015 came and went, and Congress failed to disapprove the agreement, the Iran nuclear deal was sanctified by law. The next president will more or less be stuck with it.
And with the continued weakness in the U.S. and global economy, of which OPEC’s failure to respond to sinking oil demand — in China, for example — plays a role.
The longer it takes oil producers to figure out they are producing too much to reach demand, the greater the final washout in oil prices and investors may end up being. The rest of the economic fallout will simply be collateral damage.
Robert Romano is the senior editor of Americans for Limited Government.
