It is clear that sustained high prices are starting to take their toll on European economic growth targets. They are contributing to trade balance deficits and feeding inflationary pressures. It is an unsatisfactory situation and one Saudi Arabia is keen to help address. In an interconnected world, European economic growth is in our national interest. No one benefits from a stagnating European economy and we want to do what we can to help encourage growth.
While the above sounds like good news for Europe and the US, Saudi Arabia's stance could create further tensions in the Middle East. Libya and Iran are also two larger OPEC producers and they may see higher oil prices as advantageous to their political ambitions. It could lead to tensions between Saudi Arabia and other oil producing nations. Or Saudi Arabia's stance could be seen as a way of appeasing the West just to garner protection.
On a related note, the UK is experiencing a fuel panic but for a different reason. Tanker drivers are planning to strike which would cripple the British economy. Roads Minister Mike Penning (the British equivalent to our transportation secretary) advocated British citizens stock fuel in jerry cans. The British firefighters union are throwing a fit pointing out the incredible dangers posed by people hoarding fuel in their homes. A house fire could rapidly spread out of control with people storing jerry cans of fuel.
We are seeing $3.90 a gallon for fuel here in Ohio with no sign of prices dropping as we head into the summer vacation season. The increase seems to be based purely on speculation and not on any real reductions.