Two things happened on Tuesday. The US Federal Reserve cut its target rate for overnight funds by a half percentage point, to 2 percent, and the posted price of crude oil fell to under US$20 a barrel.
Crude seems to be moving in a giant inverted V. The rise started at the end of 1998, when crude was changing hands at US$8.30 a barrel, as measured by the West Texas Intermediate posted price.
After reaching a 5-year high of US$35 a year ago, the price has been ratcheting down. On Sept. 11,the posted price was US$27.27. On Tuesday, it was US$19.25.
Part of the drop has been due to the general malaise that has plagued the world economy over the past 18 months. The slowdown has been amplified by the attack on America. The terrorists may have taken as much as US$8 a barrel off the price of crude.
This raises an interesting question. Is the decline a plus or a minus for the terrorists? The answer depends in part on what you believe their goals are.
For America, the decline in the price of crude benefits energy consumers and damages some oil-producing and oil-field service companies.
Overall, I think most economists would say the sharp drop in crude prices is a boon to the recession-prone economy. The same goes for other industrialized nations.
So whom does the price drop hurt? That's easy. The decline below US$20 is a stunning reversal of fortune for oil-exporting countries, in particular Saudi Arabia, which happens to be the birthplace of most of the Sept. 11 assassins.
For those who are upset by Saudi Arabia's apparent lack of contribution to the coalition against terrorism, this is a form of poetic justice. Saudi Arabia's problem child is now digging up his own parents' flower garden.
What must gall the Saudis is that Osama bin Laden probably is having a gigantic belly laugh over the whole thing. Not only is he accused of masterminding the Sept. 11 attacks on the US, but it seems he also got in a shot at the Saudi monarchy he professes to despise.
Bin Laden and his gang surpassed their wildest demented dreams. They also punched a hole in Kuwait and the United Arab Emirates, which are ruled by what bin Laden might characterize as the fat, corrupt, and obscenely secular potentates he so detests.
Most ironic of all, it was the late Saudi king Faisal who was attributed with saying in 1997, in the context of the Arab-Israeli war, that oil is a weapon. I wonder what Faisal would think now if he knew that, 28 years later, a member of the bin Laden family, one of the most prominent families in Saudi Arabia, had turned oil into a weapon against the kingdom itself?
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