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Raymond J. Learsy

Raymond J. Learsy

Posted: November 23, 2007 05:18 AM

Getting Real With Saudi Arabia


With OPEC heads of state and oil ministers meeting in Riyadh this weekend past, with oil prices catapulting toward $100/barrel, the administration petitioned OPEC via Energy Secretary Bodman, to increase production. The almost immediate response to Bodman's entreaty was an immediate rebuff by Saudi Oil Minister Al Naimi advising Bodman there will be absolutely no discussion "on short term supplies by heads of state or their oil ministers at this weekend Riyadh meeting".

Given the importance of oil and its price to our economy and the world's, given Saudi Arabia's leadership role within OPEC as the swing producer, given its capabilities (Saudi Arabia/OPEC is willfully holding back 1.2 million barrels of oil production per day from production levels delivered to world markets a year ago) it is altogether reasonable to say that OPEC policy is Saudi Arabia's policy. Certainly it has come to the point where pleading with the Saudis seems futile. Especially now, with oil near $100/bbl, they seem impervious to anything but their own interests. A new relationship is called for. Its preamble and policy points might well be as follows:

The current price of oil is a cartel determined price. You, Saudi Arabia, are the putative leaders of the OPEC cartel and we hold you responsible for the marketplace distortions of this fundamentally important commodity to the world's and our economy. It is a distortion that is an aggression against this nation's economic wellbeing. Therefore we announce this day and until the oil market is returned to true and manipulation free market forces-

- We have under negotiation with you together with other OPEC Gulf States a major provision of advanced armaments. These negotiations will cease immediately. We will be pleased to give you phone numbers of our counterparts in Russia should you wish to procure these armaments elsewhere.

- We will immediately stand down one half of the naval task force patrolling the Arabian/Persian Gulf protecting your shoreline at a cost to our treasury of some $100mm/day. As the price of oil continues to escalate, as further quantities are withheld by you from market, we will make further reductions in the task force capabilities.

- We will make it clear that we consider Saudi Arabia withholding oil from world markets an unfriendly act and if our actions in turn result in Iranian hegemony of the Persian/Arabian Gulf, so be it. This with the clear-eyed understanding that given Saudi actions our relations with the Iranians can not be worse then they are in actuality with the Saudis, and at some levels, as on a people to people basis, decidedly better. One need only read the U.S. Commission on International Religious Freedom's report released last week highlighting Saudi Arabia's egregious violations of religious rights and lack of progress on efforts to halt the exportation of extremist ideology and continued practices violating the rights at home of minority Shiite Muslims, non Muslim religious groups and women. Or yesterday's lead story in the NYTimes that the Saudi's are the largest contingent by far of foreign insurgents/suicide bombers in Iraq and that according to American military officials "Saudi citizens provide the majority of financing for Al Queda in Mesopotania." And not to be forgotten, the fifteen Saudi citizens on those planes.

- With prices at these levels and as a signal of our displeasure with Saudi/OPEC actions, we will immediately desist from making further purchases of oil for our Strategic Petroleum Reserve until prices abate significantly.

- As we consider current oil prices a threat to our economy we will begin releasing oil from the Strategic Petroleum Reserve both to make more oil available to the market and to discipline trading on commodity markets so that one way bets can no longer be taken for granted.

- The Administration will actively work with Congress to pass the NOPEC measure, withdrawing the President's earlier threat of veto, so that the sovereign exemption will be lifted from judicial procedures in American courts thereby permitting process of claims in American courts against OPEC entities for their cartel/monopolistic collusion.

- We will petition the World Trade Organization to actively pursue Saudi Arabia and OPEC member states to desist from their cartel manipulations which contravenes the essence of the WTO mandate.

- We will redouble efforts to reduce domestic consumption of gasoline by introducing programs to changeover automobile fleets to flex fuel, hybrid electric, and on, while mandating wide distribution capabilities for biofuels at gas stations throughout the land.

- As our efforts take hold we will progressively institute a cap on national gasoline consumption thereby reducing dependence on oil imports and mitigating risks to global warming.

- We will encourage Detroit to accelerate efforts building flex fuel/electric vehicles, providing government loans to assist the retooling of Detroit's infrastructure.

- We will make a major commitment to overhaul and building out our mass transportation networks most especially bringing our rail network to par with European standards (trains traveling 200 mph plus) and refurbishing our inland waterways to carry maximum industrial and agricultural traffic.

Given their behavior, it is the time to end our supplicant relationship with Saudi Arabia. It is time for government to act!

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