President Bush shares a laugh with Saudi Prince Salman,
brother of Saudi King Abdullah
Posted on 05/15/2008 7:38:14 PM PDT by bruinbirdman
When President George Bush went to see Saudi Arabia's King Abdullah in January to plead for higher oil output, he was politely rebuffed.
The rematch is likely to be a great deal more strained.
If the Saudis deny help once again, they risk incalculable damage to their strategic alliance with Washington. The price of crude has rocketed by over $30 a barrel since that last fruitless meeting, briefly touching the once unthinkable level of $127.
Goldman Sachs fears a "super-spike" to $200 a barrel this year.
Asked what he would tell King Abdullah this time, Mr Bush said caustically: "the price is even higher."
President Bush shares a laugh with Saudi Prince Salman,
brother of Saudi King Abdullah
Indeed, it is, especially the political price.
The US-Saudi tango has been on thin ice ever since the terrorist attacks of 9/11. Sixteen of the hijackers were Saudi nationals. The Bush family has cleaved closely to the Saudi monarchy, but strong factions in Washington see Riyadh's Wahabi monarchy as part of the Mid-East problem-- not the solution.
Saudi Arabia's one saving grace -- in the eyes of US critics -- is that it has over the years been willing to cap extreme surges in the price of oil, deploying its power as the world's swing producer. This time Riyadh is giving no ground.
Oil minister Ali al-Naimi insists that there is plenty of oil about, blaming the latest spike on "the internal logic of the financial markets”, meaning hedge funds and speculators. The US Congress gave its riposte this week.
New York Senator Charles Schumer is pushing for sanctions against Saudi Arabia, targeting $1.4bn in sales of bomb kits, light armoured vehicles, as well as gear for AWACS aircraft and F-15 fighters.
"You need our arms, but we need you to cooperate and not strangle American consumers.
"Saudi Arabia could do a lot more than they have done," he said.
The Democrats are also pushing legislation that would penalize the OPEC producers cartel for "anti-competitiveness practices".
The Bush White House has rolled its eyes in exasperation at such blunt methods, but hot feelings are aroused in American public discourse.
There have been calls for a food blockade of the Arabian peninsular on the US talk radio circuit. "Let them eat sand", has been the rallying cry of the shock-jocks. OPEC has -- in effect -- cut production repeatedly.
The Saudis have let their output fall from 9.5m to 8.5m bpd over the last two years, camouflaging the move behind the accession of Ecuador and Angola to the group (which boosted nominal supply). OPEC failed to compensate for a 330,000 bpd drop in Nigerian production in April, allowing the market to tighten further.
Dr Fadhil Chalabi, a former OPEC secretary-general and now director of the Centre for Global Energy Studies, said the Saudis have roughly 2m barrels per day of scare capacity. Three quarters is heavy sulfurous crude that requires special refineries, which are already working flat out.
"They have about half a million barrels a day of good crude that they could put on the market. The puzzle is why they are not doing it. The soaring price is obviously telling us that the world needs more oil,"he said. "I can't understand why the Saudis would risk their strategic relationship with the US over this.
"They need the US more than ever given the growing influence of Iran in the region," he said.
One clue comes from the March bulletin of OAPEC, the Arab sub-group of the OPEC producers' cartel. It notes sourly that President Bush is aiming to reduce US dependency on oil imports "particularly from the Middle East”, by 75pc by the year 2025.
"This has created some ambiguity in the US position on the future of oil consumption," it said. Touchee.
King Abdullah's retort to the Bush speech was to announce that Saudi Arabia would stop developing big projects after the Khurais field comes on stream in next year with 1.2m bpd, leaving the country's oil in the ground for future generations.
Chris Skrebowski, Editor of Petroleum Review, said the awful truth is that Saudi Arabia cannot raise oil output much even if it tries. "The myth of Saudi spare capacity is convenient for everybody: it gives OPEC leverage, and it gives the West hope.
"But Saudi reserves are secret. They have never been verified," he said.
Mr Skrebowski said oil is soaring because output is falling in Mexico, the US, and the North Sea. Russia stunned the markets with a 1pc fall in first quarter in Russia. "We are running the system flat out,"he said. The jury is out on the durability of this oil rally.
Bulls bet that roaring Chinese demand growth of 400,000 bpd each year will keep going, while fuel subsidies in much of Asia and the Mid-East insulate users from the real cost of crude.
But if the downturn spreads from North America to Europe, Japan, and even China, it could upset with the delicately balance forces of supply and demand. The International Energy Agency (IEA) says demand will cool to 86.8m bpd this year, falling below supply for several quarters.
It estimates for demand growth in 2008 at just 1m bpd , less than half the level predicted last July.
US inventories are creeping up. They are slightly above their five-year average of 326m barrels. Eduardo Lopez, the IEA's chief oil analyst, says OPEC is fears that prices could tumble as the slowdown bites.
"Even if they increased supply today, it would not hit the market until June or July, just as demand slows. They are bad memories from past cycles. Some of these countries are spending so much that they can barely get by with prices at $125, so they are very worried about losing revenues. Iran and Venezuela are textbook cases," he said.
James Williams of West Texas Research Group said OPEC was right to be wary of the turning cycle. "If stocks build up at a time of recession, it creates the possibility of an unmanageable collapse. Oil could drop like a rock,"he said.
Liberal DemoRAT Energy Plan:
1. You can’t drill for oil anywhere.
2. You can’t build a refinery anywhere.
3. You can’t build a nuclear power plant anywhere.
4. You can’t burn coal for electricity.
5. You can’t allow the oil companies to reinvest their profits into exploration.
6. But you can drive up the price of food by subsidizing an ethanol industry that takes land out of food production while using more energy than it creates.
7.You must continue to tax every gallon of gas that we put in our tanks.
8.You must threaten all energy users with additional ‘carbon taxes’.
9. And just in case some entrepreneur out there somewhere may have an idea for an alternative energy concept that just might work, you must raise the capital gains tax so that investors have less capital and less incentive to invest in his/her project. count your blessings.
With the coming change in administration, it| will be a wonder if the price of gasoline doesn’t get to $10 per gallon.
All this and more thanks to anti-American, anti-Semitic, anti-military Liberal Radical DemoRATS.
Invade them, take their oil and say “Yeah, we did it for the oil.”
The dems have been saying this anyway so what’s the difference if we make it true?
“Swing away George, Swing away” comes to mind with that picture.
“What is best in life?” To seize the oil, to drive the effendis before you, and to hear the lamentations of the mullahs! Allahu fubar!
In this case, I think the Saudi Oil prince is correct, the only thing keeping massive Hedge Funds afloat is the oil specualtion business, if that collpases, we in the US will be in deep trouble.
There are things we can do, drill more oil, decrease our debt loads, like that 400 billion dollar farm bill will...err...
Stock up on charmin folks.
He needs to make them “an offer they can’t refuse..”
The democrats lack of a viable energy policy is a problem, but this is somewhat irrelevant to the fact that our policy regarding Saudi Arabia is also just a bit tangled. If these folks didn’t have oil, they would be as anathema as the junta running Myanmar. Castro is about a millennium advanced on these folks.
Drill, drill, drill in the US, Canada AND Mexico.
“The myth of Saudi spare capacity is convenient for everybody: it gives OPEC leverage, and it gives the West hope.”
I wouldn’t bet that the Saudi spare capacity is only a myth. During the eighties, it was often said that they were pumping around 8 million barrels per day, but could pump around 11 or 12 million (as I recall). It was believed and at times demonstrated that they could up their output above 8 million per day.
But it’s strange to me that Bush is again going to KSA to discuss crude prices, unless some positive result has been negotiated in advance. World leaders usually don’t walk into a situation blind and set themselves up for failure - especially for two failures in a row.
as much as we have supported them over many, many years - all the military material, equipment and training, the protection, the cover we have provided them, surely there is some leverage to be used so as to pry open those wells.
Thanks for posting John McCain’s Energy Plan.
Yeah? Well, Sen. Dumbass, we don't elect Saudis to address issues affecting Americans. We elect freakin' pantloads like you for some inexplicable reason.
Makes one wonder, eh?
yitbos
Majority of the 9/11 terrorists were Saudi. When I see the recent picture of Bush laughing with Saudi it makes me sick. And the suicide bombers in Iraq are mostly Saudi. Bush is a weasel.
Good point.
I have a whole host of names for Liberals, unfortunately, they can’t be posted.
It must be remembered that, even with Republicans in control of The Presidency and both houses of congress, the U.S.A. did not increase its own capacity. There was a reason.
yitbos
I hope this trip isn’t a cover to tell the sand kingdom when Iran will be attacked.....then again....!
We’re asking other countries to produce more oil and we won’t produce more ourselves?
That's funny. Who is short the futures contracts that these hedge funds are buying?
Beats me slick, can you think of any other reason why the pay in amount on oil contracts remains at 5%, or is that just a free market thing?
Raise the amount of cash needed to speculate in oil futures, and the price will go down, yet only Byron Dorgan has dared to suggest the same strategy that stopped the Hunt Brothers...
Pay in amount? What's that?
Raise the amount of cash needed to speculate in oil futures, and the price will go down,
Sounds easy. How many times has that worked before?
yet only Byron Dorgan has dared to suggest the same strategy that stopped the Hunt Brothers...
Who is buying up all the oil? The Feds sold a lot of silver to stop the Hunt brothers. Do you think someone has enough oil sitting around to suddenly dump on the market?
Click the link for an unbelievable picture.
http://unusuallystupidpoliticians.com/wp-content/uploads/2008/02/bush-bandar.jpg
Nice thought Padre, but there are thriving commodities exchanges beside NYMEX. If we raise the margin requirements, some exchange in Tokyo, London, or anywhere else that has electricuty and fiber optic cable or decent whether for a satellite will keep their margin at 5% and that's wher contracts would be traded.
A dude sitting in his bathrobe ina Condo on Tahiti has faster access to more markets than JP Morgan in his Wall Street Office 80 years ago or the Hunts in their Dallas office 30 years ago. An E*Trade account will get you full access to 8 exchanges and numerous OTC markets, FRiend. You've got 3 commodities exchanges right here in the States, but CFTC and NFA can't do jack past the border...
But the US market is still the largest, a pebble in the pond here makes more of a ripple, but so far we won’t throw the pebble, raise margin calls and margin downpayments and the oil market will cool a bit.
Hey Toddster, here is a market for you, the Dhimmis refused to vote for the Free Trade agreement with Columbia, for 20 bucks, will they win or lose seats in the House and Senate for doing so?
No, will you be happy that the policies that you support will see so many Democrats elected?
After all toddster, if one’s Globalism is so palatable to the voters, surely a 20 dollar wager is within your means, we can donate it to the next Freepathon...if such policies are so solid, surely the rest of the Globalism block would be more then happy to put their money where their policy position are
Right?
later
bttt
Lowering taxes, privatizing Social Security, shrinking government and increasing defense spending will get many Democrats elected?
After all toddster, if one’s Globalism is so palatable to the voters, surely a 20 dollar wager is within your means
Since I don't support globalism, what are we betting on?
...if such policies are so solid, surely the rest of the Globalism block
Who is in the Globalism block? Maybe you should ping them?
So, 20 dollars, are you in or are you out?
If you like $4/gal, Thank Congress
Pray for W and Our Troops
Hmm, I will spell it out (again):
The dhimmicrats rejection of the Free Trade agreement with Columbia will not cost them a seat, in fact, they will gain seats.
20 dollars, yes or no.
I see, the only reason the Dems will gain seats is because they alienated our ally by refusing to vote on a trade agreement? How will you decide you were right?
Typical, if you do not wish to see the political angle and ramifications of your positions that is fine, politics however, is not an economic forum, you and your Troika are litteraly putting the Dems in power.
Your refusal to put your money where your mandibles are is no surprise..
Good evening them.
Were I a producer of crude, or natgas, or a refiner producing #2 oil or RBOB, I should do exactly the same thing.
The difference between the tenor of the energy mkts 6-8-10 yrs ago and today is this: we now have, and have had since basically 2002, great pools of capital that are either NOLLSO or LOSO, that haven't any direct interest in the energy mkts, and that are -- in America at least -- effectively unregulated as to size of position and disclosure.
You saw, I assume, the temporary effect that CFTC's comments on energy mkts had on the mkts today (roughly 10:30 CDT)?
Never mind 'jawboning', CFTC needs to (and they know it, btw) get after properly regulating ICE. Whether they'll be allowed to do so is of course a separate question.
Lowering taxes, privatizing Social Security, shrinking government, stopping illegal immigration and increasing defense spending would help the Republicans win the House, Senate and the Presidency.
politics however, is not an economic forum, you and your Troika are litteraly putting the Dems in power.
How's that?
It may soon be cheaper to replace squares of Charmin with one dollar bills thanks to Helicopter Ben & Co.
Probably a bit more scratchy though.
“I can’t understand why the Saudis would risk their strategic relationship with the US over this.”
Because the Saudis want the U.S. to have a muslim president, and we just happen to have one running.
“We’re asking other countries to produce more oil and we won’t produce more ourselves?”
Exactly right. Our own politicians are responsible for our “energy problems”. But we’re about to elect people who won’t allow us to access the vast oil deposits off our own continental shelves although Russia and China are already there, and want to stop construction of nuclear power plants despite the fact that this where the other leading economies get most of their energy.
$200 oil, $8 gas will break the ChiComs, not Uncle Sam.
The Olympics are over after 8/8/8, keep that in mind.
yitbos
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If the Saudis deny help once again, they risk incalculable damage to their strategic alliance with Washington. The price of crude has rocketed by over $30 a barrel since that last fruitless meeting, briefly touching the once unthinkable level of $127... The US-Saudi tango has been on thin ice ever since the terrorist attacks of 9/11. Sixteen of the hijackers were Saudi nationals... Saudi Arabia's one saving grace -- in the eyes of US critics -- is that it has over the years been willing to cap extreme surges in the price of oil, deploying its power as the world's swing producer. This time Riyadh is giving no ground... New York Senator Charles Schumer is pushing for sanctions against Saudi Arabia, targeting $1.4bn in sales of bomb kits, light armoured vehicles, as well as gear for AWACS aircraft and F-15 fighters... The Democrats are also pushing legislation that would penalize the OPEC producers cartel for "anti-competitiveness practices"... There have been calls for a food blockade of the Arabian peninsular on the US talk radio circuit. "Let them eat sand", has been the rallying cry of the shock-jocks. OPEC has -- in effect -- cut production repeatedly. The Saudis have let their output fall from 9.5m to 8.5m bpd over the last two years, camouflaging the move behind the accession of Ecuador and Angola to the group (which boosted nominal supply). OPEC failed to compensate for a 330,000 bpd drop in Nigerian production in April, allowing the market to tighten further. Dr Fadhil Chalabi, a former OPEC secretary-general and now director of the Centre for Global Energy Studies, said the Saudis have roughly 2m barrels per day of s[p]are capacity. Three quarters is heavy sulfurous crude that requires special refineries, which are already working flat out... Chris Skrebowski, Editor of Petroleum Review... said oil is soaring because output is falling in Mexico, the US, and the North Sea. Russia stunned the markets with a 1pc fall in first quarter in Russia... Eduardo Lopez, the IEA's chief oil analyst, says... "...Some of these countries are spending so much that they can barely get by with prices at $125, so they are very worried about losing revenues. Iran and Venezuela are textbook cases," he said.
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