Saudi Arabia Shows rationality and spine

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I realize that an essentially unarmed nation dealing with an armed world, especially the 800 pound gorilla US, is tricky, but here the Saudi Oil minister stands up and asks the pertinent question Why increase current oil output?

Saudi Arabian Oil Minister Ali Naimi . . . questioned whether global demand was high enough to justify adding more oil to the market. . . "That's what is needed by customers," he said. "That's what they are asking for. They are not asking for 10 million barrels a day."

www.usatoday.com...

It is whether to increase output from 9.5 to 10 million barrels per day.

He is not caving to interests such as the Bush administration who wants to artificially lower the price of oil.

The US grew up on the notion that oil was virtuallly unlimited. Other developed nations never had as much indigenous oil supply so have always treated it more frugally. We tend to act like oil addicts, using it like there is no tommorrow.

The Saudis, in this instance, seem to be trying to take the middle ground. They are supplying the worlds needs in a reasonable manner, but without attempting to glut the market or starve it.

Their exact motivations are unknown. But if they have rational leaders they probably see it is their longer term interests to supply oil in a steady amount to forestall the eventual impact of peak oil longer, and to make it less of a sharp spike of cheaply priced oil slamming down into astronomical prices.

Now if the energy hungry world has the rationality and will, they will try to find alternative energy sources and more efficient ways of using available energy resources while there is a window of opportunity, without an earthquake hitting global civilization.
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This is the same country that would flood the market with cheap oil in order to stamp out re-newable energy r&d companies thus eliminating any competition to oil.

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Let's hope they have matured a bit since the 1970s and realize that oil, namely their oil, is a finite supply.

If they want to get the most money for the finite resource for the finite supply they have, they would wan't the price to be as high as possible.

There are possible simple pragmatic limitations on what they, by themselves can do in any event. You can only pump so much oil out at a time without spending unnecessary money building pumping capacity. With many other sources in the world and Caspian sea oil getting ready to flow a 70s oil embargo becomes very difficult to produce.

If they are sensible they will want to quietly discretely become rich and re-invest that wealth in enterprises that help create long-term economic success.
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Originally posted by slank
Let's hope they have matured a bit since the 1970s and realize that oil, namely their oil, is a finite supply.

Now now.. we're projecting on them.

If the House of Saud ever recognizes their supply to be finite, we the world and their fellow countrymen will NEVER be let in on that secret. Be assured of that.

They are literally considered "state secrets". Nobody independent really knows how much good and recoverable oil Saudi Aramco has.

Why? If people did, and almost surely it is less than the propaganda (OPEC oil quotas are based on "reported" reserves!! So everybody has incentive to lie) then in the short run
oil prices would go up a bit, but it would also stimulate a transition away from oil sooner rather than later.

Most importantly to them, Saudi geopolitical influence would immediately start to decline, and there would probably be significant unrest at home. That feeling would be "you old guys are super rich and corrupt, and us young guys are getting the shaft! Death to Saud! long live Osama!"

Norway, by contrast, was far more honest about its production and reserves being an ethical Western country. And it put its oil revenues into a long-term financial trust invested for the benefit of its countrymen for when the oil runs out.

Are the Saudis doing that for the benefit of all? Or are they handing out oil cash to the princes and tribal chieftans for their loyalty?

The Saudis always choose short-term expedience (e.g. ally with crazy Wahhabi and fundamentalists as long as the jihad is outside their borders) over long-term wisdom.

They're even worse than the USA in this regard.

The political survival of the present generation relies on pumping as much as they can, and lying, taking the money and running from the jihadi mob out to cut off their heads.

I think all Saudi statements on their oil policies need to be seen through their own domestic political needs first and external relations second.

We're oil consumers, but they're oil producers with no other competitive products. Admitting to their youth that there will not be much oil left when they come of age is very very dangerous.

There are possible simple pragmatic limitations on what they, by themselves can do in any event. You can only pump so much oil out at a time without spending unnecessary money building pumping capacity. With many other sources in the world and Caspian sea oil getting ready to flow a 70s oil embargo becomes very difficult to produce.

Slank you hit on a very good point. with oil in the 20 dollar a barrel range during a good part of the 90's investment into the oil infrastructure of saudi and all other oil pumping nations was very minimal.

I bet Saudi Arabia is concerned with all of the investment into Iraq as far as there oil infrastructure goes. you now that the Iraqis are going to have to pump as much oil as they can sicne they basically do not have any other source of income. this will eventually lead to a decline in oil prices which will hurt the saudis politacally as well as in there pocket book.

Why? If people did, and almost surely it is less than the propaganda (OPEC oil quotas are based on "reported" reserves!! So everybody has incentive to lie) then in the short run
oil prices would go up a bit, but it would also stimulate a transition away from oil sooner rather than later.

Most importantly to them, Saudi geopolitical influence would immediately start to decline, and there would probably be significant unrest at home. That feeling would be "you old guys are super rich and corrupt, and us young guys are getting the shaft! Death to Saud! long live Osama!"

mbkennel, you are right on the money. Opec countries lie on there reserves so they can pump more oil. Saudi Arabia has over the years preached hatred towards america in order to keep its citizens from directing there anger towards them. The ruling class have plundered the countries natural resources for there own benifit living as kings while the average saudi lives in poverty.

The biggest concern for the House of Saud is keeping their rule alive and well. They will do what ever is best for their survival, as they see it.

Originally posted by slank
The Saudis, in this instance, seem to be trying to take the middle ground. They are supplying the worlds needs in a reasonable manner, but without attempting to glut the market or starve it.

Giving the Saudi regime far to much credit if you ask me. The House of Saud is not a government it is a corrupt corporation which would have no problem crushing international oil markets and exhausting it's own oil reserves if it thought even for a second that it was in danger of being thrown out of power.

Another point is that the Saudis are crazy if they don't realize that most western nations are happy to let them burn through their reserves until every last wells pumps sand. Why not buy up all their oil and when they run out, be it next year or 50 years from now, then they get tossed out like a paper napkin while the west finds new reserves domesticly and from emerging markets (nations). Hell, Canada has a heck of alot more oil than the Saudis and is THE major supplier to the U.S. yet Canadian oil companies still buy Saudi oil, why do you think that is? It's what is untapped that holds the real value not the wells running at 110% of capacity in the deserts of Saudi Arabia.

There are problems with conversion and extraction that make Canadian reserves very problematic.

Cheap Saudi oil has been the crack that has made addicts of us all. It's hard to turn away from that.

There are also other considerations to consider with the kingdom. Although they export the insane Wahabbist ideology, they have also been a bulwark of ours against the Iranian regime.

On the other hand, they have been a huge roadblock in trying to make peace in the Arab/Israeli conflict. We need them both; and yet, they hate each other. Try dealing with that. It's a wicked catch 22.

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You have made good counterpoints.

I was probably grasping at illlusions of nobility.

But rational thought, action and speech almost look noble don't they?

Canadian reserves are not as cheap to extract.
It takes a larger part of a barrel of oil to extract Canada's reserve than the Saudi reserves.

I suppose it is easier to rain on Bush's parade of wishes, when he has his military might tied down in Iraq.
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Originally posted by slank
I suppose it is easier to rain on Bush's parade of wishes, when he has his military might tied down in Iraq.
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The peak oil discussion as it relates to the Saudi's goes alot further then who occupies the the Oval Office in any given 4 year period. Whatever president Bush does or does not do, the Saudi's have been on the international radar as a problem for decades and will continue to be untill their reserves are no more.

As for Canada's oil being harder to extract.........all those difficulties will evaporate once mid-east oil begins to dry up, thats why there is so much regulatory difficulty in extracing it now. "A bird in hand is worth two in the bush".

Saudi oil is like cheap crack.

But think about it this way. When the crack is gone, the addict will go through withdrawl pains, but eventually he'll be sober and able to get something else.

What can the crack dealer do when there's no more crack to sell? What job is he going to get then?

The USA and other oil consuming nations will be hurt certainly, but there are alternatives. Mainly they will be massive LNG imports from South America and Russia (your car can be converted to run on natural gas) and coal-to-hydrocarbon-liquid technology, biofuels and stringent efficiency.

OK, it will hurt, but we will survive.

Now, what will happen to the Saudis, and the Arabs once the oil is gone? Obviously the House of Saud will be executed in a violent fundamentalist revolution, but after that?


It will turn back into desert, with all the wealth, sophistication and enligtenment of Chad or warlord Somalia. You know how good fundamentalist religion and dissipative princes are for capitalist economic development.

Let's all hope they don't have nuclear weapons by then.

Peak Oil is bad for us---it's catastrophe for them.

Originally posted by mbkennel
Peak Oil is bad for us---it's catastrophe for them.

mbkennel, I agree with that statement whole-heartedly. The only hope for the people of that region is a major economic shift from oil to other industries and tourism. But I don't see that happening unless the fundamentalists lose out to the moderates, and that doesn't look likely at present.

Originally posted by looking4truth
The only hope for the people of that region is a major economic shift from oil to other industries and tourism

Saudi will NEVER be a tourist destination.

You don't think Disney would want to build a "Lawrence Of Arabia Metts Mickey Mouse" type theme park? Or what about Dollywood 2 in the heart of islamic fundamentalism

No seroiusly though, there is much history and alot of things to be seen in that country, I'm sure there are many who would like to see it's beauty someday.

Many will be disappointed. I assure you, it will never happen. If you'd like to understand this better, read:

"Secrets of the Kingdom" by Gerald Posner

Only people who go there to work and some military are allowed in. Some oil industry employees have even been refused entry b/c they are Jewish, black or female. Females are not allowed in unless they are with their husband, in the military or the strange and odd exception of a journalist (when the kingdom desires some good PR).

Trust me, the clerics will never allow it.