By Jim Jubak
Saudi Arabia is running the U.S. economy.

I'm not sure the Saudis want the task, but they've got it. Because the United States still doesn't have a national energy policy, we've thrown decisions about how fast our economy grows and whether our standard of living rises or falls into the hands of Saudi Arabia's oil ministry.

That's risky, since the economic self-interest of Saudi Arabia and the United States aren't always aligned, and because keeping the fractious and often dysfunctional governments of the world's oil producers on the same economic course is a whole lot harder than building consensus among the governors of the Federal Reserve.

Fed ain't what it used to be
Remember the good ol' days? Back when the U.S. Federal Reserve and its chairman were in charge of our economy? The Fed would try to find a delicate balance in setting interest rates: High enough to control inflation and low enough to encourage economic growth. Once upon a time, those policy changes were actually the most important decisions anyone made about the U.S. economy.

By the Fed's own admission, the growth of global liquidity has reduced the U.S. central bank's ability to control interest rates -- and thus the economy -- in the United States. Think about this: The Fed raises short-term interest rates relentlessly from their 1% low in June 2003, and yet long-term rates sink as global cash flows overwhelm the Fed's domestic policy shifts.

Still, the U.S. stock and bond markets hang on the Federal Reserve's every word. Just last week the stock market rallied on the release of minutes from the Fed's rate-setting body, the Open Market Committee.

How quaint. Investors would be better off parsing the comments of Saudi oil minister Ali Naimi.

Saudi have the clout
It's now Saudi Arabia that's trying to find a delicate balance. In the Organization of Petroleum Exporting Countries (OPEC), the Saudis are the swing producer -- the only major oil producer with enough extra production capacity to increase supply when the price of a barrel of crude soars, and the only major oil producer with the political will and foresight to cut supply when prices fall too low. Right now, the Saudis are producing at 8.5 million barrels a day. Depending on whose figures you believe, their production capacity is anywhere from 9 million to 11 million barrels a day.

If the Saudis allow oil prices to climb too high, then consumers will cut back on use, and energy alternatives will become sufficiently attractive to investors to cut into oil's share of the global energy market. Worst case: Oil prices will climb so high that they cause a global recession that will certainly cut demand.