BY: Deng Leuth Yuang, CALGARY, Alberta, CANADA, JAN/24/2015, SSN;
“The fear of the unknown is going to be supportive to crude oil prices. King Abdullah was the architect of the current strategy to keep production high and force out smaller players instead of cutting,” said John Kilduff, partner at Again Capital LLC in New York.
Following the death of Saudi Arabia King, the US West Texas Intermediate benchmark rose by more than 2% selling at $47.76 a barrel and the international Brent Crude benchmark rose by more than 1.5% selling at $49.10 a barrel.
Wow! A world of Unbelievables, a Little United States of America in the heart of Middle East is exerting its pressure upon world’s energy giants – oil and gas economies, companies and individual dealers to either adjust, stay put or do away with oil. Unbelievable!
This brings me to the South Sudan’s economy. There was some uproar among certain quarters of South Sudanese when Pres. Salva Kiir sent condolences to the people of the Kingdom of Saudi Arabia for the death of their leader. These critics claimed that late King Abdullah was an Islamic Jihadist, and hence there are better things Mr. Kiir should spend his time on such as expediting the peace process or mourning those killed in the country by his self-made senseless war.
That is great, but one thing is crystal clear. I do think President Kiir was playing out his international diplomatic role as a leader in his own right to ‘appease and recognize the Kingdom’ as an important partner in the world market today.
In any particular market set up, there are two main sets of competitors, the major vs the fringe. Saudi Arabia is a major player whereas South Sudan is a fringe or minor.
Actions by Saudi Arabia can send waves across the energy markets whereas South Sudan’s actions are just a drop in the ocean.
The answer lies in the production capacities of approximately 9.7 million vs 160, 000 bpd for Kingdom and South Sudan respectively. Look at those numbers!
Henceforth, Saudi Arabia is holding the energy world hostage. How South Sudan economy fares well in the next 2-3 years will be determined neither by US nor the Arusha intra-party or Addis Ababa national peace talks, but by this relatively small superpower, not weaponry or technology but oil guru, the Kingdom of Saudi Arabia!
That is to say, if you live in South Sudan and you want an end to that scarcity of hard currency in Juba, especially that exorbitant Forex rate of up to 7.3 SSP a dollar; or you are looking for US dollars for your overseas treatment, rental and other family obligations such as studies and other accessories, pray to and plead with the new King Salman Ibn Saud to cut oil production in his country.
Saudi Arabia holds the key to South Sudan finding its footing again in the community of nations. Meanwhile, the US government is just a mere spectator waiting for an opportunity from OPEC to wink so as to exploit the situation.
The US laissez faire system is unregulated and run by a myriad of greedy oil companies such as Exxon Mobil, Chevron, BP and others, competing for profits. They won’t cut anything till the invisible hand of the market reigns them out.
However, such intricacies make us to understand why President Kiir did that unremarkable thing to mourn the death of the KING to our economy.
That is the big reason why South Sudan should not go it alone but dance to the tune of other singers.
The commentator is an Economist. Reach him at firstname.lastname@example.org