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Hat in Hand in Saudi Arabia
January 16, 2008
There
is something unseemly about the president of the United States asking a
Middle Eastern despot, pretty please, to open his pumps and push down
the global price of crude oil.
In
politely asking Saudi Arabia to open the taps a wee bit, President Bush
reminded the kingdom that high oil prices are weakening the U.S.
economy.
The Saudi
oil minister, Ali al-Naimi, appears to have brushed off the president’s
plea. Al-Naimi said, apparently with a straight face, that production
would be ramped up only “when the market justifies it.”
Well,
Ali, that’s a disingenuous wagonload of hypocrisy if anyone ever heard
it. The oil market would work a whole lot more efficiently and
transparently if there weren’t a cartel at its center manipulating
prices and production.
But
even if Al-Naimi and his bosses at the House of Saud were inclined to
go along with Bush’s request, it wouldn’t solve the underlying problem.
As long as the U.S. is a heavy consumer of oil, it will be subject to
the decisions and considerations of a cartel that pursues its own
interests, not America’s.
For
example, national oil companies, such as Saudi Aramco, have little
interest in allowing Western oil companies to tap their reserves, which
could conceivably lower the price of oil through expanded production.
As the CEO of Total, France’s leading oil company, told The Economist
recently, making life more convenient for Western oil companies is not
the lodestar of decision-making in oil exporting countries.
So,
to meet rising demand and to offset declining production in older
fields, the Western majors must look for oil in ever more difficult
places – in seawater thousands of feet deep or polar regions – or from
sources that are ever more difficult to produce – the viscous goo of
the Alberta tar sands, for example.
Oil
from such places or in such forms is costlier to produce. That, along
with rising demand, puts upward pressure on oil prices. As demand
increases, the market, manipulated as it is by the cartel, will
continue to communicate the difficult geology and vexing geopolitics of
oil through prices.
Rather
than going to the Saudis, hat in hand, asking for favors, the president
and his successor would be far better served helping the folks back
home find new and cleaner ways to move people and goods.
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