Archive for the ‘OPEC’ Category

Once again, hat in hand, we go to Saudi Arabia

Tuesday, May 20th, 2008

originally posted by Set America Free Coalition member Gal Luft on MESH on May 16:

Four months and thirty extra dollars a barrel later, President Bush is again in Saudi Arabia trying to persuade the Saudis to open the spigot and increase OPEC production. Last time the answer was a resounding no. Not even a gift of 900 precision-guided bombs helped convince the Saudis to show more oomph at the pump. The lesson for the Administration: speak softer and wave a bigger gift. This time the United States has agreed to help Saudi Arabia, the world’s largest oil exporter, develop “civilian” nuclear power.

Of course the Saudi interest in nuclear power has nothing to do with energy production but with Iran and the Sunnis’ fears of Iranian hegemony. Does President Bush really believe that helping the Saudis with nuclear technologies would cause Tehran to pull the plug on its nuclear program?

Saudi Oil Minister Ali al-Naimi insists that the oil market is well supplied, blaming the high prices on hedge funds and speculators. Considering the fact that OPEC production level is not much higher than its level thirty years ago and that Saudi output is lower than it was two years ago, putting the entire blame on speculators is utter nonsense.

The Saudis have always taken pride in their role as swing producers, claiming to own over 2mbd in spare capacity. But what good is this liquidity mechanism if they are not prepared to use it? When last month Nigeria’s production fell by 330,000 bpd, OPEC did not lift a finger to compensate for the loss. At what level will they provide us with liquidity? $200? $300?

If the Saudis are right and it’s all about the speculators, why not put this to test? This is exactly what Bush should have suggested: pour some oil into the market for a limited period of time and let’s measure the effect on prices so we can determine who is the culprit. With projected revenues of $400 billion this year, the Saudis can surely afford to embark on such an experiment and clear their name once and for all. But as I wrote here in January, we’d rather beg than blame.

The spectacle of an American president begging for oil every few months only to be rewarded with a slap in the face is getting a bit tedious. What’s next? Naming one of our aircraft carriers USS Ibn Saud?

What oil money buys

Monday, May 5th, 2008

The Australian surveys what petrodollars buy for the Saudis:

The Saudi Government – largely through its embassy – is believed to have funnelled at least $120 million into Australia since the 1970s to propagate hardline Islam, bankroll radical clerics and build mosques, schools and charitable orgnisations.
But the Saudi cash that has flowed into Australia, that also allegedly has paid the allowance of hardline Canberra cleric Mohammed Swaiti, who has publicly praised jihadists, is dwarfed by the $90 billion Riyadh is believed to have pumped into promoting Islamic fundamentalism internationally.

The article adds this additional insight into the regime that holds the world by its unmentionables by virtue of its control of a quarter of the world’s oil reserves and essentially all of the oil market’s swing capacity:

The most recent insight into the nature of Saudi society came with the release this month of the Human Rights Watch report Perpetual Minors, about the status imposed on women by Riyadh’s doctrinaire interpretation of Sura 4, verse 34 of the Koran: "Men are the protectors and maintainers of women because God has given the one more (strength) than the other and because they support them from their means."
The report outlines how adult Saudi women generally must obtain permission from a male guardian to work, travel, study or marry, while being denied the right to make even the most trivial decisions on behalf of their children and being segregated from men under laws enforced by the Orwellian-sounding Commission for the Promotion of Virtue and the Prevention of Vice (the religious police).
In 2004, the UN ranked Saudi Arabia 77th of 78 countries for gender empowerment, defined as the ability of women to take part in economic and political life, ahead of Yemen. Australia was eighth, Norway first.
While Saudi Arabia exports its Wahhabi version of Islam to the world, Saudi society groans under the weight of its internal contradictions. The first class of female law students will graduate from King Abdul Aziz University this year, but the Saudi Ministry of Justice prohibits female lawyers from practising. Judges consider women to be lacking in reason and faith, and have refused to allow them to speak in the courtroom because their voices are shameful.
A Saudi labour code, which came into force in 2006, states that all Saudi workers have the right to work without discrimination, but also specifies "women shall work in all fields suitable to their nature".
Literacy among Saudi women and girls over the age of 15 has risen sharply, according to UN reports, from 16.4 per cent in 1970 to 83.3 per cent in 2005 and Saudi women make up 58 per cent of university graduates (most at teachers colleges), but education is dependent on the permission of male guardians, universities are segregated, and women are excluded from disciplines such as engineering, architecture or political science.
Last year, a 19-year-old gang-rape victim was sentenced to 200 lashes and six months’ jail for being in a car with an unrelated man when she was attacked by seven men. In 2002, a fire at an elementary school in Mecca resulted in 15 schoolgirls being burned alive because the religious police refused to let them out of the school without headscarfs.

Freedom’s Enemies Hate Biofuels

Monday, April 28th, 2008

Venezuelan petrotyrant Hugo Chavez has renewed his denunciations of biofuels. According to an Associated Press story dated April 26, 2008:

“Venezuelan President Hugo Chavez says a U.S. push to boost ethanol production during a world food crisis is a ‘crime.’
The socialist leader says he’s concerned that so much U.S.-produced corn could be used to make biofuel, instead of feeding the world’s poor.
Chavez says the corn needed to fill an average car with ethanol would be enough to feed seven people for a year.”

Actually, since a bushel of corn yields 2.8 gallons of ethanol, the corn needed to fill a 20 gallon SUV tank is 7 bushels, which at the current market price of $5/bushel, costs a total of $35. According to Mr. Chavez, then, the cost of feeding one person for a year is $5. With oil hitting $120/barrel, Mr. Chavez’s government this year will receive about $88 billion in revenues taxed from the rest of the global economy, while the OPEC governments collectively will tax the world to the tune of $1400 billion.

(Omitted from Chavez’s analysis is the fact that the ethanol program has actually stimulated corn production so much that, after the part used for ethanol is taken away, the net US corn harvest available for food and feed is up 34% since 2002. Furthermore, contrary to claims in many articles, this has not been done at the expense of soy or wheat production. In fact, U.S. soy plantings this year are expected to be up 18% to a near record of 75 million acres, wheat plantings are up 6%, and overall, US farm exports are up 23%. Much more can be produced as demand requires, since of 800 million acres of US farmland, only 280 million are actually being farmed. This is why – $5 per person per year feeding price aside –  the entire Malthusian conceit underlying Chavez’s fuel vs. food argument is nonsense.)

Chavez’s remarks reinforce those made by the Saudi Arabian oil minister in a speech made in Paris April 8, wherein he expressed his deep concern that biofuels could contribute to global warming. Chavez and the Saudi’s negative assessments of biofuels were also strongly supported by arch Malthusian Lester Brown in an op ed in the Washington Post April 22.

The fundamental unity of the Islamist, the petrotyrant, and the Malthusian positions was made clear by pro-OPEC propagandist Robert Bryce, in a debate with me that aired on the Mike Medved Show April 21. (Which can be heard by clicking here.)

When hard pressed, Bryce finally emerged with the following argument: Biofuels are to be shunned because they threaten to lower the price of oil, and thus encourage economic growth, particularly in the third world, and thus global warming.

So apparently we should all be thankful to OPEC, which by taxing the world economy into a recession, is doing so much to curtail uncontrolled human aspirations, while concentrating power in the hands of those who would eliminate all freedom forever. 

Robert Zubrin, author “Energy Victory: Winning the war on Terror by Breaking Free of Oil,”

A reader writes in with an example of how innumerate Chavez’ statement is:

“If the $88 billion/year Venezuelan oil revenue figure is correct (and I have no reason to suspect otherwise), then Hugo Chavez can singlehandedly end global hunger – $88 billion/$5 per person = 17.6 billion people that can be fed on Venezuelan oil revenue alone. What a humanitarian gesture that would be! And as there are only 6.6 billion people on Earth, he can still pocket $55 billion dollars for his own personal needs…”

Would you like 15% higher oil prices?

Friday, April 25th, 2008

Merrill Lynch commodity strategist Francisco Blanch says that oil and gasoline prices would be about 15% higher if biofuel producers weren’t increasing their output. That would put oil at more than $115 a barrel, instead of the current price of around $102. U.S. gasoline prices would have surged to more than $3.70 a gallon, compared with an average of a little more than $3.25 today. Biofuels are playing “a critical role” in satisfying world demand, says Fatih Birol, chief economist of the Paris-based International Energy Agency. Without them, “it would be much more difficult to balance global oil markets,” he said.

Source: Wall Street Journal, March 24, 2008

With oil around $120, the 15% increase in oil price discussed above should the anti-biofuel propaganda prevail and biofuel production be reduced would carry us to $138. Apparently, the anti-biofuel crowd, with Saudi Minister of Petroleum and Mineral Resources Ali Al-Naimi taking the lead, wouldn’t mind that outcome.

The Saudis hate alcohol

Friday, April 11th, 2008

It’s official. Right from the top. The kingdom of Saudi Arabia hates biofuels. Out of concern for the environment and world energy security, of course. At the International Oil Summit in Paris Saudi Minister of Petroleum and Mineral Resources Ali Al-Naimi promised that fossil fuels will supply the bulk of global energy needs for at least the next 50 years. He said that “ethanol and other biofuels do not meet environmental and energy security goals” and that “their cultivation eats into the human food supply, reduces the absorption of carbon dioxide as forests are cut down, has not improved the security of energy supply and has not reduced petrol prices.” Biofuels also enjoy “financial favouritism” from governments, according to the minister.
“we have to look beyond biofuels… and concentrate instead on truly renewable sources of energy,” he said, flagging solar energy as “perhaps the best source” of alternative energy, predicting researchers will succeed in making solar cells “more effective” to expand use. What the Saudis omit is that we no longer produce electricity from oil so solar power is no threat. This cannot be said about alcohols which directly displace oil and snatch petrodollars from the Saudi coffers.

Merrill Lynch analyst Francisco Blanch just told the WSJ that without biofuels, the price of oil would be about 15% higher than it now is. This means at least $13 higher. This year the US will import 5 billion barrels. At $13 saving for each barrel, that adds up to a saving to the country as a whole of $65 billion in foriegn oil payments due to current biofuel programs.
That shows that our biofuels program has cost the Saudis billions. No wonder they are opposed to it. It just needs to be taken further.

How Saudis suppress free speech in Canada

Monday, January 21st, 2008

A Canadian newspaper publisher called Ezra Levant decided to publish the Danish cartoons in his newspaper, irking a radical Saudi trained imam. That imam, who has called for the imposition of Sharia – Islamic law – in our northern neighbor has utilized a Kafka-esque government entity called the “Canadian Human Rights Commission” — think of it as the Candian version of the Saudi Mutaween, aka the Committee for the Propagation of Virtue and Prevention of Vice — to investigate the publisher for exercising his fundamental right to free speech in a way that a radical Muslim perceives as offensive. Essentially, this imam is using the Canadian Human Rights Commission to enforce radical Islamic speech codes.

The clips below of the interrogation are a must see for anybody who cares about the preservation of our freedom.

Ezra Levant’s opening statement at the interrogation:

The interrogating bureaucrat on the hunt for a thought crime:

If you would like to support this brave man’s fight for our inalienable right to free speech, you can do so at his website

Bush begs the Saudis

Wednesday, January 16th, 2008

(Crossposted at Middle East Strategy at Harvard (MESH))

Bush Abdullah

President Bush’s appeal to the Saudis to increase oil production is more pitiful than understandable. At $100 a barrel, the United States bleeds over a billion dollars per day in order to finance its petroleum import needs. The result: ballooning trade deficits, growing unemployment, a weakened dollar and crumbling financial institutions like Citigroup and Merrill Lynch now forced to beg Persian Gulf monarchies for cash infusions. At current oil prices, the U.S. economy is melting faster than the ice caps.

But despite the president’s sweet-talk, his ridiculous appearance in a traditional Arab robe, his hand-holding with the Saudi monarchs, and even his gift of 900 precision-guided bombs, the Saudis were quick to respond with a slap in the face. Within one hour, the kingdom’s oil minister announced that oil prices would remain tied to market forces and the Saudis would not open the spigot.

This is hardly a surprise to me. The Saudis—despite their claims that oil high prices are the doing of Wall Street speculators and American SUV-driving soccer moms—are the first to blame for the current oil crisis. Their reluctance to invest in new production, their lack of transparency on reserve data and their anti-market practices, which prevent international oil companies from operating in their midst in any meaningful way, are the real reason for the quadrupling of prices in the past six years.

The Saudis are also the prime reason for the failure of the Iraqi oil industry to take off. Exactly four years ago I warned that the United States was turning a blind eye to the Saudi failure to seal its border with Iraq. This led to a migration of thousands of Saudi jihadists into Iraq, a fact that contributed to the terror campaign against Iraq’s oil industry. If not for the attacks, Iraq today could have been producing at least five million barrels per day. Instead it does less than three. Of course no one has ever held the Saudis accountable for the loss of two million barrels per day—an amount of oil that, were it in the market today, would have dropped prices by at least $30 a barrel. We’d rather beg than blame.

The truth is that the Saudis feel quite cozy at $100 oil. The world economy hasn’t come down (yet), the American public is docile, and oil-exporting countries—the recipients of a transfer on a scale the world has never known—are having a jolly time. Furthermore, the Saudis feel they have already met their obligation to the American economy by standing steadfast against other OPEC members like Iran and Venezuela, which are pushing for an OPEC decision to dump the dollar as the currency used for oil trades. Such a step could send the dollar down like a rocket.

So much of this is our own doing. Two years ago President Bush committed a major blunder, allowing Saudi Arabia’s admission to the World Trade Organization. By dint of its leadership of the OPEC cartel, no other country is more responsible for violating free trade than Saudi Arabia. Yet, its admission was not contingent on any behavioral change. Thus the Saudis enjoy the benefits of free trade while continuing to manipulate the price of the world’s most important traded commodity.

Furthermore, the United States has its own mechanisms to bring down oil prices. It owns 770 million barrels in strategic reserves. OECD countries have between them 4 billion barrels in stock. Yet, not a drop of oil has been released. Now that the Iowa caucuses are over, the United States could remove the 54-cent tariff on imported ethanol and bring billions of gallons of alternative fuel into the country almost overnight. This alone could drive down gasoline prices by at least 50 cents per gallon. And there are more strategic solutions which could remove the yoke of our oil dependence, like providing fuel choice and electrifying our transportation system. (We no longer produce electricity from oil.)

The spectacle of American presidents kowtowing to the Saudis is as old as U.S. involvement in the Middle East. Six decades ago FDR had to steal a cigarette in a stairwell of the USS Quincy in order not to smoke in King Abdulaziz’s presence. (Winston Churchill, on the other hand, had a smoke and a drink!) With growing dependence on the Saudis, our sovereignty and freedom of action have been steadily eroded. Barring some serious action, no matter who the next president is, he or she will have to ride a lot of camels and wear a lot of robes to keep the oil barrels rolling.

What petrodollars buy

Tuesday, January 15th, 2008

Walid Phares explains what $1 billion dollars in Iranian oil money means in terms of reach and power for the terrorist organization Hizballah.

Get flexible

Sunday, December 9th, 2007

The newest Set America Free Coalition member, Admiral James Lyons, writes in the Washington Times:

Terrorist training camps and insurgents in Iraq and elsewhere are funded by Saudi and Iranian petrodollars. So are bounties for families of suicide bombers. It is incredible: by buying Saudi-controlled OPEC oil we finance a war against ourselves.

But the Saudis are not alone. Iran has used its vast accumulation of petrodollars to support terrorism throughout the Middle East as well as providing funds for their drive to develop a nuclear weapon. Oil has also given Iran, Venezuela and — in the past — Libya the flexibility to ignore economic sanctions by finding amoral partners such as China, Russia and some of the European countries who are willing to trade with them. Petro revenue has provided Vladimir Putin the means to centralize his power, bully his neighbors and steer Russia on an independent course that has been unhelpful to U.S. interests.

For all these reasons, as well as for our long-term economic and security concerns, we must break our addiction to oil…

We have technology that will underpin an energy strategy that will break our petro-addiction and OPEC’s hegemony. That strategy lies in something already available: mixed-fuel technology; vehicles that use a mixture of ethanol, methanol and gasoline.

Ethanol is produced from a variety of agricultural sources, primarily sugarcane and corn, at as low as $1.50 a gallon. In 2006, methanol, which can be made from coal, natural gas and agricultural waste, was being sold without any subsidies for 80 cents per gallon.

The engineering difference for a flex fuel car requires an additional sensor and computer chip that controls the fuel-air mixture. It also should have a corrosion resistant fuel system. The overall increase in costs for a flex fuel car will average about $100 per vehicle.

This year Detroit has offered two dozen models with a flex fuel option. To accelerate this program, Congress needs to put politics aside and enact legislation to require that 50 percent of all vehicles produced by our auto manufacturers must be flex fuel by 2012. This will not be easy. However, this is a figure the Big Three auto makers proposed to President Bush when they met last year.

IEA: Oil Crunch around the corner

Wednesday, July 11th, 2007

In its starkest warning yet on the world’s fuel outlook, the International Energy Agency said the world is facing an oil supply “crunch” within five years that will force up prices to record levels and increase the west’s dependence on oil cartel Opec. “oil looks extremely tight in five years time” and there are “prospects of even tighter natural gas markets at the turn of the decade,” said the agency’s Medium-Term Oil Market Report, which is published every six months. “Low OPEC spare capacity and slow non-OPEC production growth are of significant concern.” Global oil demand is forecast to expand by 2.2 percent a year on average, reaching 95.8 million barrels a day by 2012. The fastest growth will occur in Asia.

The report also showed that Chinese oil demand will reach almost 10 million barrels a day in 2012, compared with its domestic production that year of about 3.9 million barrels a day.