US dependence on Saudi Oil falls!

Times have been changing rather quickly for the alliance between the United States and Saudi Arabia.

The main reason is energy. US dependence on Saudi Oil has been dropping rapidly in the last decade, dropping by 50% thanks largely to increased oil production in America (if you want to try trading oil on HowTheMarketWorks, check out the OIL ETF!). Saudi Arabia once was a major force for US policy makers to contend with; it is a leading member in OPEC, the consortium of many oil producers that coordinates production to try to ensure stable prices for its member countries, and from the mid 1970’s until very recently the United States was very depended on imported Saudi oil to keep its engines running. Many Saudi fortunes were also made when gas prices spiked in the mid-2000’s.

However, in the last few years the dynamic has been changing rapidly. The United States just has not been demanding as much oil as it used to, which is coupling with the massive drop in oil prices to have a huge impact on the Saudi budget (another popular oil ETF is USO, USO). This comes as the United States has withdrawn troops from Iraq, and so is less reliant on Saudi military bases for supplies and logistics. There has also been tension because the Saudis would very much like the US to become more actively involved in in military campaigns in Syria, and the recent nuclear treaty with Iran, Saudi Arabia’s historical rival.

The Saudi King Salman will be in Washington today to discuss these policies and others with President Obama, but the balance of power at the table will be very different than it may have been just a few years ago.

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