As Oil Approaches $100, is Saudi Arabia Waging Resource Aggression Against the American People and the World Economy?!

Imagine waking up to the following nightmare headline "Canada Interdicts the Head Waters of the Missouri and Mississippi Rivers and All Water Flows From Its Territory Into the Great Lakes." One's reaction would not be passive nor that of our government to such a blatant act of resource aggression. And if you permit a glib interjection, any argumentation that , "well its water on their side of the border" would hold no water whatsoever. The deterioration of relations between the United States and Canada would be immediate, grave, and threatening.

Yet in degree, this is the current status of our resource relationship with the Saudis. Consider the following. On March 5, 2007 in a first page article "Oil Innovations Pump New Life Into Old Wells", the New York Times reported that Nansen G. Saleri, the head of reservoir management at the state owned Saudi Aramco reported that Saudi Arabia's total reserves were almost three times higher than the kingdom's officially published figure of 260 billion barrels. He estimated the kingdom's resources at 716 billion barrels. Mr. Saleri continued that he wouldn't be surprised if ultimate reserves of Saudi Arabia reached a trillion, (1,000,000,000,000) barrels!

This amazing revelation coming from the reservoir manager of Aramco underlines the degree to which the Saudis have perverted the current world oil market. The Saudis are the putative leaders of OPEC and their capabilities and objectives determine OPEC's policy goals. It is clear as the International Energy Agency phrased it in their recent report, "The greater the increase in the call of oil and gas...the more likely it will be that they will seek a higher rent from their exports and to impose higher prices ... by deferring investment and constraining production."

Saudi Arabia, given its enormous reserves, could readily produce significant additional quantities of oil in order to abate the steep run up of oil prices. At these price levels the fact they and OPEC are maintaining the major portion of their production cuts made at the beginning of this year (OPEC's production cut of 1.7 million barrels/day altered by a production increase of only 500,000 barrels/day starting this month) is smoking gun evidence of their extortionist intent. By holding oil off the market, oil which they clearly have in ample supply, they are gouging the world's economies, pricing their product at levels that have no market rationale whatsoever. They are preying on the world's need for oil. It is an act of resource aggression against the world's consumers much as Canada's hypothetical interference with the headwaters of our major river ways would be an act of aggression against the United States.

Please note in my title I referred to waging resource aggression against the American people. The government was not mentioned because in this imbroglio our administration is in effect Saudi Arabia's, as well as OPEC's and the oil patch's greatest ally. In the near seven years of its Presidency, virtually nothing has been done to constrain Saudi Arabia's policies. On the contrary our President and Vice President are so wedded to the oil industry's interests that the enormous increase in oil prices during their tenure can well be ascribed to willful lack of any forceful policies to counter the Saudi extortion. This has manifested itself in many ways.

Let me just cite a few:

- In the near seven years of the Bush presidency, virtually no serious steps have been taken to significantly abate demand for fossil fuels;

- The nations Strategic Petroleum Reserve has been used to underpin escalating prices by continuing purchases even as prices exploded, thereby signaling the governments acceptance and approval of these price levels, and worse by declaring the doubling of the Reserve just as crude oil prices were retreating to $50/bbl earlier this year.

- Neither through "friendly persuasion" nor as a Dutch Uncle, making Saudi Arabia understand its price and production policies are intolerable. This even though we are in essence the guarantors of last resort of Saudi Arabia's independence as evidenced by the some $100 million dollars a day being expended from this nation's treasury on our naval flotilla stationed off the Saudi Coast in the Arabian Gulf- thereby serving as a bulwark against Shia Iran that without our presence would have designs and capabilities against Sunni Saudi Arabia;

- By the fawning obsequiousness our high government officials have shown toward Saudi officialdom, (see "The Price of Oil, OPEC and Our Laws and Now Welcome to Vichy" 5.4.06) or be it Price Bandar's open access to the Oval Office while he was Ambassador in Washington and thereafter.

- Or as exemplified by the symbolic holding of then Price Abdullah's hand at the Crawford Ranch meeting (see "Cheney in Saudi Land, Don't Hold Abdullah's Hand" 01.16.06; and "President Bush's Most Respectful Letter to King Abdullah on Energy Cooperation" 06.22.06 ) whose coziness resulted in an almost immediate upward ratcheting of oil prices.

The administration's oil industry buddies are ecstatic at the windfall the entire oil sector has reaped by the quadrupling of oil prices to levels undreamed of before the advent of this Presidency, while many of the nations citizens are having their household budgets ripped to shreds in order to meet their home heating bills this coming winter. Rarely if ever in the history of the Republic has there been such a divergence between the nation's interests and those of the vested interests that formed this administration.

Raymond J. Learsy is the author of the newly updated Over a Barrel: Breaking Oil's Grip on Our Future

Comments

[ajax2]

"... the Saudis are gouging the world's economies, pricing their product at levels that have no market rationale whatsoever"

I believe that gouging is rational for a cartel. With the U.S. sitting on Iraq oil are we not a de facto OPEC member?

[realitytrumpsbull]

Um, weren't these guys basically man-dating
before the whole 9/11 thing? I don't buy a
word of any of it, and the best thing that
could happen to all our oil friends, both
foreign and domestic, is to become independent
of the resource. This would force them to
find the dreaded 'day job' and largely
disempower them from fiddling with the Con Me.
Not that they wouldn't TRY, but...

"A parked car consumes no fuel".-Me.

[MilwaukeeDan]

Mr. Learsy, let me get this straight, we sort of elect a energy company running president and vp and we expect them to hold prices down on energy, are you kidding me?

[sabocat]

Since prices at the pump have not risen in tandem with the wholesale trading price, folks like Ralph Nader are of the opinion that the current high wholesale price is due to the falling value of the dollar on the international market.

[ImmanuelGoldstein]

Part of the increase is due to the collapse in value of the dollar which is the result of our own fiscal mismanagement.
Again I point out, the Saudi's are maximizing their return on a non-renewable resource. And increasing prices is the ONLY thing that will push us to energy independence. History shows we will rapidly loose interest in alternative fuels and conservation if the price goes down. I know you'd love to fill up your SUV for a dollar a gallon, but that can't last forever!

[Macready]

All too true unfortunately: "Rarely if ever in the history of the Republic has there been such a divergence between the nation's interests and those of the vested interests that formed this Administra­tion."

So will Congress impeach and restore the Constitution to stop this . . . we wait not holding our breath

[ekelly]

Another secret and government documents still not seen....th­e Cheney meeting with oil companies. I wouldn't doubt it was all figured from the start. So much for an open transparent government that is concerned with its citizenry.

[avergejoe]

Give it up.

Constantly blaming OPEC, not big oil or emerging economies like China or commodities markets, for increased prices is yellow journalism.

Wanna bet some oil firm sets ANOTHER profit record this year?

[Independent voter]

Obviously, yes.

I recall Bush during his first campaign telling the American people how he was going to strong arm the Saudi's into lowering the price of oil - because it was too high at $25 per barrel.