Saudis protect own interests in oil production
WASHINGTON (AP) — When President Bush, once a Texas oilman, asked Saudi Arabia to pump more crude, he may have forgotten that the Saudis have a long memory. And that made it a good bet his mission this past week would produce a dry hole.
In the 1990s the OPEC cartel was eager to pump more oil in a grab for cash as prices — like today — were going up, passing what then was viewed as a healthy sum in the $20-plus range. But then the Asia economic crisis struck and oil prices plummeted to below $10 a barrel.
Saudi Arabia and other producers got burned.
“They remember that and they’re not going have that happen again,” says Robert Ebel, an international energy expert at the Center for Strategic and International Studies. “They understand the market just as well as we do.”
This time Bush in his trip to Riyadh and his private meetings with Saudi King Abdullah walked away with a trickle of oil, but nowhere near a gusher.
Timing the announcement with the president’s visit, the Saudis said they would pump an additional 300,000 barrels of crude next month. They also made a point that the decision had been made a week ago, and not in response to Bush’s visit.
Energy analysts saw it as a token, and, in fact, oil markets responded by boosting prices a few more dollars to $126 a barrel.
A dozen years ago OPEC, led by the Saudis, were more likely to loosen their oil spigots, often cheating on the oil cartel’s self-imposed quotas. Today their primary goal is keep the supply and demand in close balance — and guard against prices tanking.
So when Bush made his second personal appeal this year to King Abdullah in search of ways to ease the pain for American motorists from soaring gasoline costs, the Saudis told him there’s plenty of oil already available. The additional 300,000 barrels — bringing Saudi Arabia production to 9.4 million barrels a day — was simply to meet customer needs in June, officials explained.
Saudi oil minister Ali al-Naimi scolded those “who are questioning our oil practices and policies.” Saudi officials also have reminded U.S. officials that they’re increasing their capacity to produce more oil, now about 11.8 million barrels a day, but of course that doesn’t bring any more actual oil onto the market.
Bush may not have agreed, but despite his close personal relationship with King Abdullah, he wasn’t going to get anything close to what he sought. For the Saudis this is pure business.
Eight years ago when Bush was running for president and the Clinton administration was trying to pry more oil out of OPEC the future president said that as a former oilman he would “jawbone” the producers and get them to “open their spigots.”
Bill Richardson, now the governor of New Mexico and then energy secretary, says he jawboned as best he could and “on several occasions they increased production and the price actually went down.”
“They hated to see me coming, but they listened,” said Richardson, adding that the Saudis and other OPEC countries “aren’t terribly concerned about high prices.”
While Bush promised he would jawbone, said Richardson, “he never did it. … He never jawbones.”
Ebel, a longtime international energy analyst, calls all the rhetoric about jawboning OPEC “political talk” to mask a simple fact: there’s little that oil-consuming nations — even the world’s biggest — can do to force OPEC to produce more oil if they don’t think it’s in their interest.
“I don’t think you can go over there, knock on the door with your hand out and say, ’I want more oil.’ It’s not going to happen,” says Ebel.
Energy Secretary Samuel Bodman knows about that. He’s traveled to meet with the oil sheiks a number of times, but he acknowledges the limits of his influence.
Bodman put it this way when asked by members of Congress last November why he can’t get OPEC to pump more oil: “I certainly have made my views known. Whether they respond or choose to respond is up to them and not up to me. I’m doing the best I can within the limited sets of options that we have.”
Bernard Picchi, senior energy analyst at Wall Street Access, an independent research firm, says the Saudis also have to “walk a fine line” between behaving as a good ally to the United States, their biggest customer, and alienating other OPEC members.
“They played nice with us two years ago and did increase production going into the jaws of the heating season, and overproduced,” recalls Picchi. But in the spring demand dropped and oil prices fell. “A lot of people within OPEC blamed (the Saudis) of succumbing to U.S. pressure,” said Picchi.
Published in The Messenger 5.20.08