Questions Energy Secretary Bodman Need Ask At This Weekend's Summit In Saudi Arabia
The Pooh-Bahs of the oil world, both producer and consumer, will be meeting this weekend summoned to Jeddah, Saudi Arabia by King Abdullah and Saudi Arabia's oil minister Ali al-Naimi. The question is why are prices at levels that nobody seems to be able to explain, levels that seriously and negatively impact the world economy, especially those of developing countries. Our Energy Secretary Sam Bodman, seeking clarification, needs take it one step further getting answers to questions that are not usually asked nor discussed. Questions such as:
-OPEC President Chakib Kheklil, has pointed to "the central issue is speculation". His position has been echoed by other OPEC members and many in high position in the consumer class, oil executives, politicians, pundits. Simultaneously the oil exporting nations have accumulated vast reservoirs of wealth into the hundred of billions. In spite of pleadings by governments and world financial institutions for transparency, the operations of the Sovereign Wealth Funds remain opaque as are their goals and investments. The sums are so enormous they are prone to mischief.
Given the importance of oil and oil markets to the wellbeing of the countries in question, what assurances does the oil consuming class have that this wealth is not being used by the sovereign wealth funds, its tributaries or straw men to game the oil futures market supporting paper barrels (oil futures markets) to control and maximize the price of wet barrels (the barrels being loaded unto oil tankers and storage facilities around the world). Certainly in terms of funds available the capability is there, and given the opaque nature of the commodity exchanges around the world it could (is?) be achieved and continue unabated until and unless hard questions are asked.
Therefore, can we have assurances from the oil producing nations that their Sovereign Wealth Funds, are not being used, directly or indirectly to support oil prices on commodity exchanges around the world?
-You, here in Saudi Arabia, are the custodian of the largest reserves of crude oil in the world which is both fortuitous and freighted with responsibility. Yet you have not shared with us a reliable assessment of your reserves and production capabilities in spite of entreaties by governments around the world, the IEA and the G-8. When will you be forthcoming so that those responsible for forward economic planning worldwide will have hard numbers to go by on these vital statistics?
-As an example of the confusion prevailing on this issue, you have generally let it be understood that your current reserves approximate 261 billion barrels. Yet on December 27, 2004, Saudi Minister of Petroleum Ali al-Naimi said in a statement issued after opening new oil fields in eastern Saudi Arabia that the 261 billion barrels still waiting to be pumped might actually turn out to be 461 billion barrels. "There are big chances to increase the kingdom's producible reserves by 200 billion barrels" he said "this will come either through new discoveries or through increasing production from known deposits". Then, more recently theNew York Times reported on March 5, 2007 in a front page article ("Oil Innovations Pump New Life Into Old Wells") quoting Nansen G. Saleri, the head of reservoir management at the state-owned Saudi Aramco, who said that new seismic tools giving geologists a better view of oil fields, real-time imaging software and the ability to drill horizontal wells could boost global reserves. Mr. Saleri said that Saudi Arabia's total reserves were almost three times higher that the kingdom's officially published figure of 260 billion barrels, or about a quarter of the world's proven total. He estimated the kingdom's resources at 716 billion barrels, including oil that has already been produced as well as more uncertain reserves. And thanks to more sophisticated technology, Mr. Saleri said he "wouldn't be surprised" if ultimate reserves in Saudi Arabia eventually reached 1 trillion barrels. Your comments would be welcome, please?
-Yet over the past month the Saudi oil minister proclaimed that after the current announced expansion of Saudi oil production to 12.5 million barrels a day, all future expansion of production capacity would be foreclosed. Given the apparently huge reserves at hand, and the world's growing need for oil is this not a vastly irresponsible policy belying stewardship of an essential world resource that is both arrogant and self serving? Your comments would be welcome.
-By contrast at a different time, in 1970, Saudi Aramco with clear vision of the growing demand for oil to come, prepared a long term plan calling for the kingdom to increase its production capacity to 20 million barrels a day by 1990. Is a copy of this far sighted planning document still available?
-It is generally understood that Saudi Arabia sits atop 80 important reservoirs of oil of which only 11 of which are being tapped with one additional reservoir coming on stream in days. Is the purpose of holding back wider development of these reservoirs to give the world the illusion of shortage? Your comments would be instructive.
-In early 2007 with price of oil near $50 a barrel OPEC under the titular leadership of Saudi Arabia cut its daily production quota by 1.7 million barrels a day. Since that time the price of oil has escalated by some 160% to circa $135 barrel (for those keeping track, the dollar has given up some 25% during the same period). Yet you have reinstated only 800,000 barrels production of that cutback and with next month's 200,000 barrels increase bringing the total to one million barrels. Clearly the cutback has been devastating to oil consumers worldwide and yet you have refused to bring production levels to where they were before, in spite of the massive price increase that now borders on gouging, creating economic and social crisis in countries throughout the world and most especially in developing countries. What are we to think of this lack of responsibility toward your customer base?
-While traveling through your fair city I noticed the price of gas was 0.60 riyals per litre or 60.6 US cents per gallon. In that the price of crude constitutes some 60% of the price of gasoline, on the basis of 60 riyals per litre the crude cost basis is about $15.00 per barrel. Compare this with $130 plus the rest of the world is paying. Elsewhere whole industries are being driven out of business. There are strike actions in France, Spain, riots in India and far beyond. How can you reconcile these differences with any degree of presumption that you are acting in a commercially responsible manner?
-In late March of 2007 King Abdullah proclaimed that the United State's presence in Iraq was an "illegal occupation". Couched in that statement seemingly was an invitation for us to leave Iraq. Does that mean if we follow the King's advice and up and leave, Saudi Arabia's oil policies will become more pliant, more in keeping of those of a responsible supplier, aware of the impact its supply policies can have on the well being not only of the United States but economies and consumers around the world?
Mr. Bodman, this once earn your spurs.
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Running a guilt trip on OPEC is like telling De Beers that they should flood the market with more of the diamonds they have huge warehouses full of. The oil monopoly, too, is run for self-interest and, OMG, is arrogant? You think our sniveling would move them to gracious generosity? Sheesh.
We cannot even afford to threaten them with a refusal of weaponry. The whole world is willing to supply them with whatever they want. They have the oil. And until it runs out, or until we stop our oil addictions, they can and will do whatever they wish.
Why not try some arm twisting (or begging) with our domestic oil barons? If we don't have any leverage at home, and we don't, (oh, I expect that when alternatives get going, we can expect the monopolists to toss us a crumb or two) better practise the humble pie of finding a way to get along without them. Or should we just threaten to nuke them? If we can't have the oil, no one can.
We are oil-whipped pussycats. Power belongs to the suppliers. It's what's called the American Way.
Obama calls for legislation to close Enron Loophole
that permits excessive speculation in oil futures
at Yahoo:
http://new
at Politico:
http://www
text of Obama announcement:
http://www
Saudi Arabia is not the problem, but thinking they are is a problem.
Bodman needs help telling the time, and you wouldn't be the person to do it.
LMAO...sno
Keith Olberman's comment:
http://www
Hydrogen and Solar power are the key to the future of our economy. Oil is on it's way out. Good riddance to oil!!!!
I accept peak oil and climate change. We need to lower demand, break OPEC, break the jihadists, solve the Israel/Palestinian problem, improve trans-Atlantic relations, recognize that oil-poor India and China are rearing their heads into the market, close the London loophole in options and futures, and stop subordinating our foreign policy to our defunct energy policy. World-wide monopolies control the markets and the flow of information in the media.
The blame game continues in a circle while the greatest fortunes the world has ever seen accumulate. Food, energy, and the financial books are being cooked. The state attorney generals could sue OPEC, for example, as they did tobacco companies. Bush/Cheney could be impeached - that would send a message. Europe and the US, or at least some in the US, do not exactly agree that the Israeli/Palestinian conflict should go on for the rest of eternity.
With the drop in the dollar, the climate change associated with our energy policy and the failure of the military to solve our energy problems and the growing debt crisis, failure of our infrastructure, medical delivery system and educational system, time is ripe for people to vote out the bandits. The Saudis are playing a dangerous game, as are the Israelis and the US. We all need to put our heads together and work for the future of the planet.
ok
what i wrote i guess was a little too harsh....
"He estimated the kingdom's resources at 716 billion barrels, including oil that has already been produced as well as more uncertain reserves. And thanks to more sophisticated technology, Mr. Saleri said he "wouldn't be surprised" if ultimate reserves in Saudi Arabia eventually reached 1 trillion barrels."
there's no way there is a trillion barrels of oil in saudi arabia.
the entire world has consumed 1 trillion barrels of oil so far.
Professor Michael Greenberger former Director of the Commodities and Futures Trading Commission has explained them..do some research..
http://www
it's the Commodities and Futures Modernization Act which contained the Enron Loophole..
Jeeze I am getting tired of doing this..
Close McCain's Enron Loophole and
oil and gas prices will drop 25-50% overnight.
That's all Congress should be working on beside impeachment.
This Peak Oil Prankster is laughing and laughing at the hubris.
Can the answers not be found in the following simple question:
"Why sell more for less when you can sell less for more?"
Answer: In a competitive marketplace higher prices draw more competition.
You are right, it is in the best interest of the existing businesses to keep prices high but the high prices invites new competitors to enter the market and increase supply. Unless, government moves to impede this natural working of the marketplace the existing businesses have no control over who enters their business space.
Okay, if the Saudis want us to leave Iraq, we should do so in all haste, and let the Saudis and Iranians have at it with one another there. Iran does not have the money to sustain that, frankly.
That would mean that the Saudis, Kuwait, the UAE, and Iran would need the U. S. fleet to protect their oil and incoming products. WE SHOULD CHARGE THEM THREE TIMES WHAT IT COSTS US TO HAVE THAT FLEET THERE.
Then, we tell Iran that we shall provide equal protection for their oil, and for their refined products, but would have to inspect anything else for contraband, and that they would have to agree to stop enrichng and builiding nuclear facilities in order to get anything in. Protect their oil out, but nothing in, including food until they stop.
We don't have to fire a shot, and Iran would have to cave, as they cannot produce their refined petroleum and have to import so much of their food that they would starve in three months.
Why do you assume that Iran is interested in starting a war
Aside fro propaganda efforts on the part of the Bush Administration I have seen no evidence of that.
"We should charge them"
"We" Maybe its "their" oil. If it's one big global economy then there should be rules. Didn't think of that?
You want to shoot when things get tough. There are technological capabilities to produce both food and energy without shooting anyone. "Scarcity" is necessary for the economic manipulation - which, by the way, is failing worldwide.
Were the Saudis to really be interested in this situation, they and other OPEC members could just peg their oil to $100 a barrel and charge that. Speculators would not be able to screw with that. Th eother countries would have to fall in line, because why would someone buy the other, if it is more expensive?
I feel that the soverign funds of Saudi Arabia, Kuwait, the UAE, and others are involved in the speculation, as well as hedge funds and financial institutions in the U. S. and abroad. All the U. S. needs to do is say that U. S. oil companies or anyone who has business with the U. S. cannot use ICE to purchase their oil, thus obstructing who is involved in the speculation.
While I'm sure that the OPEC countries are benefiting from the price run up, I think you nailed it by putting the blame on speculation led, IMHO, by our own venerable banking institutions. Goldman -Sachs--the world's largest investment bank--and Morgan Stanley, using the Enron loophole and the 2006 easing of regulations allowing international, unregulated and untraceable electronic trading, are working hand in hand with the Oil Companies, who as 49% owners of Aramco get their oil for less than half the going market rate per barrel. Those record setting profits come from electronic trades being bought and sold back and forth--churning!
To find the real movers behind this price inflation we have only to look as far as Wall Street. The Saudis may control the largest reserves in the middle east, But Goldman, Morgan, Citi, B of A, and the Bank Of England (the European end of these transactions )control the world!
Goldman Sucks? Is that an investment bank or a statement? Two things, Rule of Law,: (1) we could feed the world (2) There is enough oil for the present moment.
As a Geology major and a wildcat driller, I know we could supply oil for a while. But if you combine the "shortage" of both food and oil at the same time, them there are "financial possibilities" for the "free market" on Wall Street.
Do the British have anything to do with the present situation? The "spot market" in Amsterdam and the Enron Loophole? BAE? How else can a tiny island make a living?
Raymond
Your obsession with Saudi Arabia is unhealthy; you're going to find this impossible to fathom but, there are other oil producing nations.
You need to educate yourself about 'Peak Oil' and greed and oil speculators who are driving the cost of a barrel through the roof to line their own pockets including vulturous American oil companies.
I suspect your obsession with the Saudis is more about your love affair with Israel, who is hard at work preparing it's next war with Iran which will drive oil through the statusphere and you'll be on huffpo pontificating and blaming the Saudis for that too.
Your whining about the Saudis is boring because it smacks of personal agenda and ... well, I'm just going to say it ... jealousy.
This is a disingenuous KISSME and you know it. "Peak Oil" is a hoax perpetrated on the world by big oil and it's enablers. Look at who funds these professionals for hire. Big Oil. Until the Kingdom, as well as other OPEC members, disclose accurate, auditable reserve statistics, there can be no free market. Defined that means supply versus demand. Game one side of the equation, supply, and this market is anything but free. Mr. Learsy has accurately described over many months the unholy relationship between the House of Bush and House of Saud that has enabled a massive transfer of sovereign wealth from the US to the Gulf States.
Your Israeli comments regarding Mr. Learsy are offensive and clearly an unsubstantiated smear on his patriotism. Unless you have evidence to the contrary, cut it out.
You think 'Peak Oil' is a hoax?
Its actually the free market, not some crazy story someone made up; China and India are putting extreme, historically unprecedented demand on the oil market because these are the largest emerging economies on the planet and our endless wars create instability and OPEC doesnt owe us or the world anything ... it's their oil and speculators come in every national creed, including the USA.
Mr.Learsy has done nothing accurately and the only unholy alliance we need to be looking at is the one between Bush/USA and Israel.
A blind man can see Learsy endless obsession with the house of Saud as a diversion from the real problem: Israel.
Learsy needs to take a deep breath and spare us all his maniacal Chicken Little hysteria about Saudia Arabia and OPEC ... they're greedy business men in collusion with American greedy business men and since we can actually do something about the corrupt American greedy business men driving the price of oil up and up that is where we should concentrate, not an attempted to bully foreign nations to bend to our will. That doesnt seem to work so well, they tend to resent it.
Your patriotism comment is laughable.
You cannot "game" the supply side of the equation if there is a open market for oil exploration. If the existing "evil" oil companies are able to "game" the market it is mostly because of the onerous regulations we have erected in this country that discourages new competitors from entering the market. So I balme our overregulated environment and government for inadvertantly giving the likes of Exxon too much power by virtue of regulating us to death.
You will encounter many tail wags the dog theorists on these supposedly liberal boards who maintain that somehow little Israel calls the shots for great big America. The truth is Israel exist precisely to fulfill our economic and strategic goals in the Mid East--not the other way round.
If I were to put on my tin foil hat and bet on someone pulling Our strings, my guess would the Great Britain and the Bank Of England, which was one of the largest holders of ownership in our so called Federal Reserve. But that's another story....
There is no "obsession" about Saudi Arabia.
They are the key to anything that happens in the oil market. Period.
Raymond you just don't seem to get the new reality. High gas prices are GOOD! They help us reduce our dependence the horrible burning of fossil fuels. We should be begging OPEC to raise prices even farther.
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