Friday, May 16, 2008

Take a Hike, Mr. President

The Saudis have politely told the The President of The United States to take a hike regarding his request that the House of Saud pump more oil in order to drive down the price. One commentator put it thusly:

"Saudi Arabia does not have customers that are making requests for oil that they are not able to satisfy," Stephen Hadley said on a day when oil prices rose above $127 a barrel, a record high. "What the Saudis wanted to tell us was we're doing everything we can do ... to meet this problem, but it's a complicated problem."

A complicated problem? If one subscribes to the work of historian William Engdahl, at least twenty to thirty dollars of the present price of oil is due to hedge fund activity. His thesis, which you can read over at the website is well thought out and plausible, but then he isn't a Peak Oil advocate. Peak Oil proponents assert that the price of oil is still entirely too low. By their runes the Saudis are likely pumping about as much as they can now since their fields are past their peak rate of production during a time of tight demand. Maybe this is so, but then access to reliable data about the condition of, Ghawar, for example, the largest oil field in the Saudi realm, or anyone's realm for that matter, is, at best, sketchy.

One would like to know more about the particulars of Mr. Hadley's first sentence regarding Saudi Arabia's "customers." That sentence, qualified as it is, has the ring of lawyer/politician speak, and as such, rings as less than forthright. What customers? Given that a lot of nations are said to be getting priced right out of the market, has Saudi Arabia's customer base changed appreciably in recent times? Perhaps customers other than the U.S. have made requests to the Saudis for oil that have not been satisfied and so they no longer are customers. After all, while the Saudis do offer an excellent grade of light sweet crude, they do not offer the only viable grade of crude oil. Perhaps some erstwhile customers are purchasing inferior grades of crude at lower prices elsewhere. One would very much like to get to the bottom of this "complicated problem." In the meantime, as summer driving season approaches, so, it would appear, does four and five dollar gasoline.

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