THE BLOG

The Saudi Oil Peril To The U.S.

08/08/2005 12:22 pm ET | Updated May 25, 2011

Saudi Foreign Minister Prince Saud al-Faisal told reporters recently that relations with the U.S. “couldn’t be better.” The prince could afford to be cheery and expansive. The royal kingdom literally has the U. S over a barrel, that is the roughly 10 million barrels that Saudi Arabia pumps out daily, about 11 percent of the world’s total. Bush officials desperately need their oil. U.S. dependency on Saudi oil is greater now than it was before the 9/11 attacks, and that mocks Bush’s claim that the U.S. can and will at least any time soon wean itself off Saudi oil, or dictate to the Saudi’s how they should run their government, or diplomatic policy.

While debate rages in government and oil circles over whether the Saudi’s fields are old and depleted, and whether they are really able to boost proven reserves to levels that can accommodate the U.S.’s oil needs, the Saudis still have a lot of oil left. Whether they can actually bump up their reserves or not, they’ll continue to dominate world market share for at least the foreseeable future. During that time, the U.S., Western Europe, China, Japan and India’s glutinous appetite for oil will continue to grow. The Energy Department estimates that it will take up to 120 million barrels per day by 2025 to satisfy that appetite. Over one–fourth of this added oil will come from the Saudis.

Meanwhile, the U.S. occasionally will talk tough to the Saudis about speeding up democratic reforms, and cracking down on Muslim fundamentalist groups. It will scold it for ignoring, downplaying, or covering up the connection between higher ups in the Saudi military and government and the 9/11 attackers (bin Laden and fifteen of the nineteen hijackers were Saudi nationals), and in the bankrolling of terrorist front groups. That’s bluster mostly for media and public consumption.

Immediately following King Fahd’s death, Vice President Dick Cheney, George Bush Sr. and Colin Powell beat a path to Riyadh to pay homage to the Saudi’s new ruler, King Abdullah. That was more than a diplomatic courtesy call. It sent a huge signal that the U.S. will do everything it could to placate the Saudi regime. The reason is simple. The much hoped for new oil sources that could break the U.S. dependency on Saudi oil have not panned out. The rivers of oil Cheney boasted would flow into the tanks of America’s gas-guzzlers after Saddam Hussein was dumped are a pipedream. Post Saddam Iraq has shown no sign that it can produce the six million barrels projected by 2010. Currently it barely squeezes out two million barrels a day. With the insurgency there getting bigger, bolder, and more lethal, the oil output could plunge even lower in coming months. Iran won’t help much either.

Though the country elected a conservative president, it still says that it will hurtle full speed forward and develop its nuclear weapon capacity. That keeps it on a collision course with the U.S. Nigeria, Russia, Venezuela, and Mexico are mired in corruption, and mismanagement, or racked by political turmoil. Libya even with a reformed, mellowed out Khadafi, doesn’t have the oil reserves to meet the U.S.’s bloated needs. Its reserves are about one sixth of Saudi Arabia’s.

American oil execs hammered the Bush administration and Congress to scrap environmental and land protections to tap the millions of barrels in oil reserves believed nestled in shale deposits off the coast and in the frozen ground on Alaska’s North Slope. Those millions may or may not be there. It will take big improvements in exploration and drilling technology, and the beating back of environmentalist’s challenges to determine the real oil potential of the North Slope and the sea. While the U.S. is the still the world’s most rapacious oil user, China and Japan have come on strong, and are willing to woo, court and pay top dollar to the Saudi’s to get the oil needed to fuel their industrial boom. The Saudi’s can and will play both nations off against the U.S. With oil prices at the record high of $60 per barrel, that means more billions into the Saudi coffers.

But that could spell greater political peril for the U.S. The royal family has taken a weak, half-hearted stab at democratic reform; it is still a tight knit, autocracy. It’s fair game for both homegrown and foreign Muslim extremists and fundamentalists. A renewed internal insurgency from them could shake the regime. That could deepen anti-American sentiment in the country, and open the door wide to greater terrorist attacks. Even without a Saudi regime shift or change, the Middle East is a tinderbox, and the anger and hostility toward U.S. policy in Iraq and its rock solid support of Israel, will prevent the Saudi government from totally realigning its policies with the U.S.

The U.S. dependency on Saudi oil will grow even greater, and the risks that that brings will nag Bush officials. And happy talk from Cheney and Saudi officials won’t change that.