New Highs for Oil, Saudi Crocodile Tears, Ecuador's Elegance
300,000 Barrels a day. That's all. After his second humiliating hat in hand, hand holding visit in five months with King Abdullah of Saudi Arabia all that President Bush could coax from his 'friend' was an exceedingly modest increase in oil production, more token than meaningful, of 300,000 barrels/day. This to counter the steep rise in the price of oil at the well and its painful consequences at the pump.
300,000 barrels a day! Merely a drop in a sea of barrels, especially from
a producer who has the largest known reserves in the world and who,
according to senator Byron Dorgan (D-ND) "has been producing
800,000 barrels less than they did two years ago."
Please see GovTrack: Senate Record: ENERGY PRICES.
For those interested in the impact this production cutback has had on the price of oil, know that the price of oil has escalated by some 150% since the inception of those cutbacks, delivering a body blow to the world economy.
For those pointing at the U.S. dollar as the culprit in this rapacious price scenario, please understand the erosion of the dollar's value over the same period was a far more modest circa 25%.
Pointedly not responding to President Bush, but to "50 countries worldwide" intoned Saudi Oil Minister al-Naimi. "Our response is positive." This while Prince Saud al-Faisal observed "The president showed great concern for the impact on the American economy" adding, one can well imagine through crocodile tears of concern, "We of course sympathize with that." No mention of course that he was talking about the 'economy' that was the de facto guarantor's of Saudi Arabia's sovereign independence and the House of Saud's reign. Being the 'economy' that financed the American military presence in the Gulf, and thereby Sunni Saudi Arabia's only persuasive deterrence to Shia expansionism.
Even Bush, now keenly aware that 300,000 bbls/day is but a band aid given the recent escalation in oil/gasoline prices, most especially for him in this election year, was reduced to commenting ,"It's something but it doesn't begin to solve the problem", and then proceeded to lash out at the Democrats and his perception on their varied failings. Far be it for him to turn justifiable and righteous anger at his good friends, the Saudis, who will be far more disposed than the Democrats to contribute generously to the soon to be the focus of his interest, the George W. Bush Presidential Library.
And then there is Ecuador. Without Mr. Bush's pleadings, and without the entreaties of the "fifty countries" who sought relief from Saudi Arabia's production constraints, acted with elegance and on its own. Without being prodded, showed the kind of responsibility, intrinsic character and humanitarian concern that one no longer dares hope for from Mr. Bush's 'friends" in Saudi Arabia.
Little Ecuador broke ranks with its fellow OPEC members, saying it would push for a rise in oil output. Galo Chiriboga, Ecuador's oil minister said an increase in oil production was necessary to help poor counties coping with high prices. This in glaring contrast with Saudi Arabia where they are building cities in the sand or burnishing their extravagantly opulent palaces, all the while depriving the world not only today but foreclosing for the future any increases in production (Al Naimi was recently quoted that oil demand did not warrant expansion of production capacity beyond the 12.5 million/day to be reached next year). And getting away with it. This from a nation whose current suzerainty extends over a resource of primordial importance to the world's economic welfare and whose sense of responsibility extends to extorting the highest price possible, consequences be damned.
Just imagine the outrage if the United States announced that it was in the process of forming an "Agopec", a cartel of grain growing nations together with Canada, Brazil, Australia, and Argentina. That as the largest sovereign grain producer, it would assume a leadership role in the new cartel. You can well imagine the howls of outrage and indignation that would be leveled, especially at this moment of growing food constraints and dietary changes as the specter of widening food shortages spread in challenged economies around the world.
But its not the same, you say. Oil is a finite commodity. Well, yes that is true in the sense that everything is finite. But importantly consider this. If oil is finite so is the production of grains and foodstuffs. To harvest yields large enough to feed the world's growing population farmers throughout the world will have to add to their soil ever larger quantities of plant nutrients and chemical fertilizer such as phosphates, potash and nitrogen/nitrates in varied forms and applications. Without such inputs crop yields would not be able to feed the world. Starvation would be rampant. Yet each of these nutrients is as "finite," if not more so than oil (it takes some five years to bring a greenfield potash plant into production). An 'Agopec' probably would not be tolerated, nor given its levels of irresponsibility to the world's well being, neither should OPEC be tolerated.
A case in point. The OPEC disease is endemic and brazen. As if to counter President Bush's pleadings for increased oil supply, Iraqi oil minister and OPEC member Hussain al -Sharistani just recently opined, as if to instruct President Bush, "There is more oil on the market than consumers want." Another "surge", anyone?
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
HuffPost's Pick
Back in the 1970's, oil prices spiked; the economy suffered as a result. Did that serve as a wake-up call? No, it didn't. Instead, I've witnessed thirty-five years of stick-in-the-mud do-nothing-ism. People have been unwilling so much as to have sidewalks built for pedestrians, and bicycle paths for bicyclists. People have been unwilling so much as to change the local ordinances so you don't have to waste gasoline keeping a lawn mowed. People have been unwilling so much as to have a 55 mile-per-hour speed limit, to improve mileage. Meanwhile, the world's supply of oil is not, after all, infinite; something's got to give. What ever happened to the promise of harnessing energy from the sun, the wind, the tides, the ocean waves? Has somebody bought up all the patent rights to the technology, just to sit on them? As I see it, Homer Simpson has been very short-sighted, and maybe it's just as well that Saudi Arabia holds his feet to the fire until he agrees that some changes are needed.
Exactly. America has begun a country that feels it deserves something, that the world owes it something for being so great. What did W say, America is the greatest hope for mankind. UGHHH!!!! America is a citizen of the world community. Nothing more, nothing less. It may have the biggest stick, but the last time I checked that stick runs on OIL.
The oil shortage of oil is real and is not being mitigated by new supply. Blaming the current price spike on speculators is wrong. Consider two facts. First, speculation takes place primarily in the futures market, not in the spot market - and spot prices have been rising steadily for many months. Second, speculative volatility cuts both ways: if speculators were driving the market up amidst a glut in supply (as many on this thread nonsensically claim), we would be seeing price spikes on the down side as well as upward. Short sellers, taking advantage of the phony supply shortage, would sell futures contracts into the price rallies. The unsustainability of upward price momentum would yield huge profits to short-sellers. The market would be much more volatile than it has been to date.
Ask yourself why this isn't happening. It's demand and supply. Demand from China and India continues to grow (in large part because these governments subsidize consumer oil prices), and they are still a fraction of per capita American demand. On the supply side, no significant new sources of oil are coming on stream. Even at $130 per barrel, no non-Opec conventional sources exist to drive down prices. In the 70s and 80s, oil from the North Sea and the Gulf of Mexico helped end the Opec-driven energy crisis. I challenge anyone to say where such cartel-busting supply exists now.
Many disagree with canuck that oil prices reflect supply and demand only. here's one,
By F William Engdahl
As business and consumers consider the implications for them of crude oil selling at US$130-plus per barrel, they should bear in mind that, at a conservative calculation, at least 60% of that price comes from unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York Nymex futures exchanges and uncontrolled inter-bank or over-the-counter trading to avoid scrutiny
US margin rules of the government's Commodity Futures Trading Commission allow speculators to buy a crude oil futures contract on the Nymex by paying only 6% of the value of the contract. At the present price of around $130 per barrel, that means a futurestrader only has to put up about $8 for every barrel. He borrows the other $120.
The hoax of "peak oil" - namely the argument that oil production has hit the point where more than half all reserves have been used and the world is on the downslope of oil at cheap price and abundant quantity - has enabled this costly fraud to continue since the invasion of Iraq in 2003, with the help of key banks, oil traders...
David Kelly, of JP Morgan Funds, recently admitted something telling to the Washington Post: "One of the things I think is very important to realize is that the growth in the world oil consumption is not that strong."
Just finished watching Charlie Rose, and Fred Smith of FedEx mentioned that over one-half of our international balance of payments deficit is due to imported oil. We need to get off of oil. It will reduce to money going to terrorists, create a lot of good jobs right here at home, and it might even make the air cleaner to breathe. I guess that's why Exxon is against it.
"70% of all drivers in the U.S. drive less then 40 miles a day."
Let just do it already and force our car manufactures do go all hybrid or all electric and we would not be having this ridiculous argument anymore. Bottom line is that we are getting robbed and people are getting killed for this liquid crack that we don't need.
Reuters 5/23/08
"Oil prices have climbed by around a third since the start of the year, driven upwards by worries about supply from non-OPEC producers and the weakening dollar which prompted investors to use oil as a hedge against the falling currency."
I believe this paragraph hits all three catalysts for the recent rise in prices, non OPEC supply, falling dollar, speculative hedging.
Uh, Ray? There IS more oil on the market than consumers want. There's a glut of crude oil on the market right now. The price of oil is being bubbled by speculation, a la dot-com bubble and housing bubble.
How come none of our economic geniuses can see these bubbles until AFTER they've popped?
Actually some do.
They are the ones who get rich when the bubbles collapse.
Apparently energy conservation hasn't become part of Learsy's vocabulary nor has become part of most American's. The only holiday we should be considering is a holiday from driving. Instead of making that commute in a single occupant SUV, we should consider car pooling or taking mass transportation at least one day per week. Europeans consume 30 percent less oil than us per capita.
A change of driving patterns and using mass transit would lead to a quick glut of oil. It takes a lot of energy to complain about government and the oil companies over energy prices, but producing our way out of this problem is not going to happen. Whereas, energy conservation is the equivilent of increasing production and prices will respond accordingly. Our infatuation with the automobille is rapidly coming to an end. Our way of life is coming to an end as well if we don't quickly change our driving habits because peak oil is here or just around the corner.
"Just imagine the outrage if the United States announced that it was in the process of forming an "Agopec", a cartel of grain growing nations together with Canada, Brazil, Australia, and Argentina.
Something like this is actually happening (globalization). We are forcing down ag trade barriers (except our own) and destroying farmers the world over. That's why there are food riots now in countries that used to be self-suffiicient in food.
Yes, I saw a map where each of the countries listed could only grow one grain. Talk about total
control but then there is the unpredictable weather and a grain may be wiped out totally.
This would certainly not be in the interest of the people but the 1% that seem to dominte the world
and want to control the whole globe. Someone please put a stop to this insanity!
Milk is $4 a gallon, bottled water almost half, yet we scream that a source of power for our transportation, lights is EXPENSIVE at $4 a gallon. I think the price should be closer to $10 and maybe americans would be more frugal with this finite asset. Nobody owes us cheap oil, we need to get over it quickly. Get rid of those ridiculous SUVs with one person inside, use public transportation, bike ( I do), walk, maybe carpool. Cheap oil is over and good ridance. I do feel for the low income workers who will be hardest hit by this and don't have many options. But our whole society has been based on giving fuel away for decades. And maybe if we wean ourselves off, we can stop invading middle eastern countries to grab their natural resources. Had to get that off my chest.
I don't HAVE to buy milk or water. I have to buy gasoline for my work and the fact I live in the country. Want to do my shopping for me in the rain on a bike? Want to pick up the kids at the school wiich is 9 miles away and no bus service here? Gas prices are hurting. And there is no reason for it.
Get a grip..
Your argument is totally without merit. You cannot compare the two. So who are working for? The Saudis' or Cheney?
We are being screwed into the ground without dinner or a reach around.
I agree we should kick the oil habit as quickly as possible and set up huge solar fields and wind farms. We can power the entire U.S. with HALF the money spent on the war for oil in Iraq.
AP 5/22/08
'Many investors believe the dollar's protracted decline over the past year has been the most significant factor behind oil's rise from about $66 a barrel a year ago.'
Every oil expert agree that there is enough oil on the market and the problem is the speculators not OPEC as you have been claiming in all your posts. Give it up, people are not as stupid as you think. You are the only one who believes your nonsense.
And by every oil expert you mean everyone except those who have been talking about peak oil for decades, I assume.
For one thing, there is nothing like an "enough oil in the market" variable in economics. If you added oil to the market, you would find additional takers at a lower price. At this point demand at the current price does not exceed production by much. Because it it did, prices would rise even more rapidly and demand decrease again until a new equilibrium had been achieved.
The problem with the speculator hypothesis is that it does not leave room for anything else. Like any other explanation relying on a single mechanism it is naive, ignorant of facts and ultimately doomed to be shown wrong.
This does not mean we should not regulate speculation. But it means that the regulation might not result in the kind of spectacular price control that most consumers hope for.
Kill,
I always told people the difference between commodity pricing and equity pricing is that with equities there is some fundamental value (basically a stream of expected cash flows times a multiplier that gives an indication of where price can reasonably be, of course expected cash flow can be way off) but with commodities no one can say that at an imbalance of X price should be Y so particularly in times of shortage price can go ANYWHERE. here is a comment someone made today on a website, I am a numbers guy and not a writer so I couldn't say it better myself. You want a reason for price where it is and here it is.
"It is about the fact that Mr. Bernanke, aka "The Wizard", has debased the former "safe haven" for money, that is the Treasury market through his "alphabet soup" games, and Paulson and Congress have done their part by blowing $450 billion in stimulus checks and housing bailout proposals. The result of all of this is that people are now looking for somewhere else to run to when threatened by fear in equities, and right now that "somewhere else" is OIL!"
As far as I know, Mr. Learsy is a member in good standing of the NOPEC movement.
Today the House voted 324-84 in favor of a bill to sue OPEC.
Here is an article outlining why exactly this stance is ridiculous.
http://www
Let's Sue OPEC! That'll Teach 'Em!
In what court, though? And how's that going to stop the Chinese from paying any price they like to get all the oil they need?
People can't live without food. They can live without driving.
I know. I know. Oil is used to produce and transport food. But everybody knows most of the oil used in this country is used frivolously. We don't consume food at 5 times the rate as the rest of the world. It's our transportation habits.
At least discuss producing gasoline & diesel from coal like the Germans did > 60 years ago and stop threatening Iran. I'll bet oil would drop big overnight if we did both.
killthemessenger and another chap say the following is not true,
"... increase in oil production, more token than meaningful, of 300,000 barrels/da
300,000 barrels a day! Merely a drop in a sea of barrels, especially from a producer who has the largest known reserves in the world and who, according to senator Byron Dorgan (D-ND) "has been producing 800,000 barrels less than they did two years ago."
I don't know who to believe. They argue in ALL CAPS.
I don't really understand your comment.
KillTheMessenger seems to know what he is talking about. I've read most of his comments recently.
The Saudis are pumping 9,450,000 barrels per day.
2 years ago it was 9,600,000 barrels per day.
In between (late 2006/early 2007) they dropped their production to 8,600,000 barrels per day.
If killthemessenger says Saudi Arabia is producing at maximum capacity, but Saudi Arabia says they are not. then who should I believe.
You are correct. The US gets most of their oil from Canada and Mexico and Venezuela.
Europe gets it from Saudi. Besides we don't have an oil shortage, the wordl currently
is swimming in oil and Iran is storing it off-shore in containers for lack of storage facilities.
It is our future's market and its implications by trading oil on paper that gets never
delivered. Hedge Fund Managers drive up the price and they benefit. It costs you
at least 1 million dollars to join a hedge fund.
Huh? I never write all caps. I sometimes capitalize one or two words. That's it. Anyway...
You might have noticed that most of our oil does not come from Saudi Arabia. It comes from Canada.
http://www
In the past we got about as much from Mexico as from Saudi Arabia, but the Mexicans have just lost Cantarell, their largest oil field and have higher national demand, so they can't export nearly as much as they did:
http://www
More data on imports here:
http://ton
We are getting large quantities of oil from Nigeria and other countries. All in, the Saudi production increase will not be noticeable.
You must be logged in to comment. Log in or connect with
