With Bush leaving town, the air is going out of the price of oil.
When back in Texas, Bush will be hailed as the President who brought the oil patch $147 barrel oil through the willful sponsorship of policies conducive to high oil prices ranging from the mismanagement of the Strategic Petroleum Reserve, cozying up to Saudi Arabia and OPEC, encouraging the Iraqi government to rejoin OPEC. By turning a blind eye to speculation and manipulation of oil trading on the commodities markets until Congress finally interceded. By permitting OPEC to collude in threatening to veto the NOPEC bill that would have passed in Congress. By doing virtually nothing in eight years to inhibit the use of fossil fuels other than a token minimum MPG mandate for Detroit and a lame allocation over those eight years dedicating some $20 billion to develop alternative energy sources, not even a sum approaching the $29 billion made available to save Bear Stearns over one weekend. So much for the outgoing administration's convoluted priorities.
And with prices collapsing, woe unto President Hugo Chavez of Venezuela. After spending the better part of the last eight years making life miserable for those oil companies that invested in Venezuela, nationalizing oil fields and subjecting them to tax extortion and imposing confiscatory royalty increases, his factotums have begun soliciting the likes of Total, Chevron and Shell in the hope of getting them to invest in Venezuela again. Good luck! The grand alliances trumpeted with his pals in Moscow for joint ventures in oil production and tar sands development seem to have gone by the wayside as well in that Russia's economy is being equally devastated by the collapse of oil prices. Things have gotten so out of hand that Hugo is limiting his fellow citizens to buying no more than US$2500 when traveling abroad at the official exchange rate. What they do on the "parallel" market where the rate is twice as high, is another story.
And the oil companies must be having a difficult time paying their oil industry flacks. How little we have heard recently about upheavals in Nigeria, fog on the Houston Ship Channel, hurricanes off Trinidad, exploding consumption in China and India, production constraints at the sadly overworked oil fields of OPEC, declining reserves in Mexico, peak oil poppycock and on.
And then of course there is King Abdullah publicly declaring that $75 oil would be reasonable, and his ever loyal and quotable oil minister Ali Naimi doing his best to be quoted by anyone who will listen, "We are working very hard to bring the market back to balance ...We will do what it takes to bring the market back to balance" he was quoted in the FT this week. This while announcing that Saudi Arabia had unilaterally cut oil production by more than the agreed OPEC limit. Really? Think about it. Mr. Ali al-Naimi is, has been notorious in putting things in the best light, supportive of oil prices and rationalizing extortionary price levels with such self-serving proclamations ranging from "build more refineries," to its all about "the falling value of the dollar" to such vacuous mumblings as "we too are afraid of high oil prices," this when oil prices were heading toward $50/bbl, before the ascent to $147, with the Saudis willfully cutting their output all the way. Could it be, could it just be, that with virtually all land storage filled to overflow and over 80 million barrels of oil sitting in storage at sea all over the world in VLCC cargo tankers, and millions more in loaded vessels proceeding purposely at snails pace speed ahead because there is nowhere to offload at destination, that the Saudis have not purposefully cut production, but that there has been little call for offtake of their oil with fewer ships coming to Saudi Arabia to lift cargo?
Whatever the price of oil is now ($36/bbl WTI as of this writing) we must never forget where the oil industry, its friends in government, Hugo and his gang, Ali al Naimi and his cohorts at OPEC would take us again if they could. Happily, and lecturing us all along the way to $147/bbl and beyond. Let us hope that with our new President the era of fossil fuel's domination of our lives will come to an end. That our dependence on oil be such that Mr. Ali al- Naimi can cut production to his heart's content, and we wouldn't care a drop.