Homemade Oil Crisis

iVillage Member
Registered: 04-16-2003
Homemade Oil Crisis
9
Tue, 05-25-2004 - 6:38pm
By David Ignatius

Tuesday, May 25, 2004; Page A17

The "oil crisis" of 2004 is one more sign that a Bush administration that once hoped to transform the sources of instability in the Middle East is instead retrenching to a messier version of the old status quo.

Desperate to slow the recent rise in oil prices, finance ministers from the Group of Eight industrialized countries last weekend demanded that OPEC countries raise their production, arguing in their communique that "lower oil prices would be of benefit to the whole world economy." Since Saudi Arabia is the only OPEC country with much spare capacity, that put the kingdom back in the familiar position of receiving entreaties from skittish Europeans, Japanese and Americans.

The Saudis responded graciously enough, and why not? They are in the driver's seat. Saudi Oil Minister Ali Naimi promised that the kingdom would pump an additional 600,000 barrels a day, boosting its output to 9.1 million barrels daily. And Saudi sources have been hinting that they're prepared to go further -- up to the kingdom's current maximum of about 10.5 million barrels a day.

To underline Saudi Arabia's decisive role in the oil market, Saudi officials were telling insiders at an International Energy Agency meeting in Amsterdam yesterday that over the next several years, they may increase their maximum capacity to 11.5 million or 12 million barrels per day -- to maintain their preferred excess-capacity buffer of 2 million barrels a day above planned production.

In this week's frantic market, even the Saudi offers to boost production haven't significantly pushed prices down. But analysts expect that as the market steadies, prices will fall several dollars from yesterday's record futures-market close of $41.72 a barrel.

The drama on the oil spot market has masked the fact that the recent price squeeze has been building for several years -- and is largely a result of conflicting policy decisions made in Washington and Riyadh. A rapidly growing Chinese economy meant that upward pressure on prices was inevitable. But neither the Saudis nor the Americans took appropriate steps to defuse the problem before it became a crisis.

The Bush administration contributed to the oil price squeeze in several ways, according to industry experts. First, it failed to address the fact that demand for gasoline in the United States was increasing sharply, thanks to ever more gas guzzlers on the road and longer commutes. The administration also continued pumping 120,000 barrels a day of crude into the Strategic Petroleum Reserve, making a tight market even tighter. And by letting the value of the dollar fall sharply over the past year, the White House all but forced the Saudis to raise dollar-denominated oil prices to compensate.

The administration's more serious mistake was that as energy supplies tightened, it did nothing to reduce U.S. demand. A year when the United States was fighting a war in Iraq would have been an ideal time to ask the country to sacrifice a bit, to reduce its dependence on oil from the Middle East. Instead, the Bush administration let SUV Nation roll on.

Meanwhile, as Americans burned their energy, the Saudis subtly fiddled with the oil market. By keeping inventories low and encouraging a policy of "just in time" deliveries to refiners, they kept spot prices on a knife edge. The result was that OPEC, after years of powerlessness, became in effect a central bank for oil.

"U.S. policymakers are guilty of denial," says Roger Diwan, a managing director of PFC Energy, a Washington-based consulting firm. "Tighter specifications for refiners, runaway demand and supply bottlenecks have indeed created market tightness. Blaming the producers doesn't solve the problems created by contradictory U.S. energy policies over the last two decades."

Bush administration officials who talked blithely in the run-up to the Iraq war about replacing Saudi Arabia as the locus of the oil market should be forced to drink a barrel of crude. As things have turned out, events have underlined the inevitability of Saudi Arabia as the supplier of last resort. An administration that set out to transform the Saudi-dependent status quo has ended up reinforcing it -- at the very time that terrorist attacks are showing the kingdom's vulnerability.

Conspiracy theorists will see these developments in oil markets as further evidence of a plot between the House of Saud and the House of Bush. That's nonsense. What we are seeing in the market is a result of clever policies in Saudi Arabia and dumb ones in the United States. This "crisis" is man-made, and the more it resembles the oil-crisis frenzy of the 1970s, the more nervous we should all be.

http://www.washingtonpost.com/wp-dyn/articles/A53223-2004May24.html

iVillage Member
Registered: 04-03-2003
Tue, 05-25-2004 - 6:46pm
Good article, well written and pertinent. Thanks... nt
iVillage Member
Registered: 03-23-2003
Wed, 05-26-2004 - 10:57am
Excellent article...should be required reading!

cl-nwtreehugger


Community Leader:


iVillage Member
Registered: 03-18-2000
Wed, 05-26-2004 - 11:41am

>"A year when the United States was fighting a war in Iraq would have been an ideal time to ask the country to sacrifice a bit, to reduce its dependence on oil from the Middle East."<


There has been no call for sacrifice of any kind. With the exception of the military personal & their families.


>"And by letting the value of the dollar fall sharply over the past year, the White House all but forced the Saudis to raise dollar-denominated oil prices to compensate. "<


Why isn't there more concern about the devalued dollar?


The Universal Currency Converter..... http://www.xe.com/ucc/


 


Photobucket&nbs

iVillage Member
Registered: 04-16-2003
Wed, 05-26-2004 - 3:43pm
<>

I remember about a year ago, I was reminded that a devalued dollar helps companies who export because there goods are less expensive. I worry about the growing debt, who is going to loan the US $$ and be repaid with cheaper ones. I just think most people just aren't affected by the decline until they notice a increase in price.

I also don't think many people have a background in economics so they just don't know, ergo don't care. Since we are moving rapidly into a global economy, the fundamentals of economics needs to be taught in high school. But then you get into which school needs to be taught, and into the economic quagmire where there are no "certain" answers.

iVillage Member
Registered: 05-02-2003
Wed, 05-26-2004 - 3:51pm
I believe only the simple finger pointers allways know a simple problem to a far more complicated problem. The problems are much deeper the just allways blaming a Administration for every single problem.

What about the fact that in the USA has not had one new refinery opened in over 20 years?

What about the refinery near San Diego who has been ready to open over 5 years ago and was not given permits to open?

What about a few refineries have closed due to age and none have replaced them?

What about 3 years ago the Bush Adm wanted to tap another source of oil in alaska near Prudhoe Bay existing oil platfrom and was blocked?

And since all oil is based in dollars except Persia(in Euros) those curriencies that use dollars will pay more?

And what about over %60 of vehicles in the USA have to be trucks/SUVs that suck gas like a shive? When you see them people on the road,,,,,hummmm only 1 person inside but as we all know Bragging rights surpass all needed requirements!

What about speculation of the open market that maybe oil may be cut off?

Why doesn't the USA have a real program to save on fossile fuels and when one comes up it's allways blocked? Not just vehicles, but all machines that needs fossile fuels in one way or another(A/C insulation, solar, etc etc etc)?

Why had the fleet average been the same for over 15 years and not raised higher?

Hydrogen is a very good idea but that's 10 years down the road.

So the are many reasons for paying higher prices and since only finger pointers just complaining and finding fault there will never ever be a solution......... so be happy, keep complaining and keep paying more and above all keep funding the terrorist!

iVillage Member
Registered: 03-18-2000
Thu, 05-27-2004 - 8:57am

Oil Companies Discreetly Negotiate With Libya.


http://www.washingtonpost.com/wp-dyn/articles/A55590-2004May25.html


American oil companies whose facilities were nationalized by Libya in the mid-1970s have been secretly negotiating with senior oil officials there for months to work out a compensation package, according to Persian Gulf regional diplomats in contact with these firms and a European cabinet minister who was in Washington recently.




The talks began in mid-2003, about six months before the international rehabilitation of the government of Moammar Gaddafi and the lifting of U.S. sanctions. Gaddafi has been recasting himself as a global team player in an effort to shed his image as the revolutionary and Arab nationalist who took over petroleum production.


"There have been and there still are some visits on an exploratory basis by these oil companies," said John Dalli, Malta's minister of foreign affairs and investment promotion, who has handled Libyan affairs for his government for 16 years.


"The agreement for nationalization originally speculated there would be a sort of compensation package. Even at that time, it indicated that assets will not be totally lost," he said in an interview Thursday. "What they will be negotiating now are the technicalities of the formula," added Dalli, who was in town last week for a meeting with Secretary of State Colin L. Powell.


Dalli said Libya's change of heart not only stems from geopolitical changes in the region and Gaddafi's disaffection with the Arab League and the Organization of African States. It also grows from rising expectations at home and new public contact with the outside world through the Internet revolution. "In a rich country like Libya, people's aspirations are growing. They want to live a normal life," said Dalli, a former finance minister.


In recent years, Western companies have expressed new interest in tapping Libya's consumer market and updating its oil industry's infrastructure. Gaddafi's resistance even to modest free-market reforms in the past few years had constrained foreign investment, but that may change now.


The Libyans are insisting that foreign companies doing business in Libya "come in as partners and not as traders," added Dalli.


Malta managed to maintain cordial ties with Libya while honoring the U.N.-imposed sanctions of 1992-2000. Now, Dalli said, Malta is hoping to find a niche for itself in mid-level management and services operations of Libya's oil industry.


"Malta can act as a facilitator for companies or individuals hoping to do business in Libya," he said. "We know the terrain and can act as very good scouts."


'Multilateral Hell'

Who said America doesn't know how to succeed in dramatic transformations of warring societies and in democratic nation-building? All it has to do is go back to its old recipes.


A two-volume study just published by the German Historical Institute documents one of U.S. foreign policy's shining moments: "Never before has America expended so many resources to remake a foreign and occupied nation in its own political, social and cultural image," said German Ambassador Wolfgang Ischinger, reading last Wednesday evening from the study by a Heidelberg University professor.


Then Ischinger gave his own thoughts on the study's subject, the events in his own country after 1945: "These volumes explain that America knows how to transform a defeated nation into a friend. . . . America knows how to promote the rule of law, and human rights."


The ambassador spoke at a high-wattage gathering of European ambassadors and former officials invited to honor Strobe Talbott, deputy secretary of state in the Clinton years, at the German ambassador's residence on Foxhall Road.


Ischinger presented Talbott with a copy of the study after decorating him with one of the highest ranks of Germany's Knight Commander's Cross of the Order of Merit, for diplomatic vision in defining a common Western approach to the Kosovo crisis.


The German ambassador described Talbott's energetic shuttle diplomacy with the Russians, the Finns, the French and others, which led to the adoption of a U.N. Security Council resolution and the 1999 deployment of peacekeeping forces in Kosovo.


"Was this easy? No. Were the Europeans troublesome partners for Washington? Was war by committee giving American leaders multiple headaches? You bet. . . . But what really mattered was that you, Strobe, created an atmosphere where everybody had a stake in the mission's success," Ischinger said.


"Yes, we did find you troublesome . . . your many committees and mysterious rites," quipped Talbott about what he called his foray into "multilateral hell." To commemorate the occasion, Talbott coined a very lengthy term in the ambassador's native tongue to express how the United States is viewed on the continent: "meist unumgehbare manchmal unausstehbare alleingebliebene Supermacht," German for "mostly indispensable, but sometimes insufferable, sole remaining superpower."

cl-Libraone~

 


Photobucket&nbs

iVillage Member
Registered: 04-16-2003
Thu, 05-27-2004 - 12:00pm
I assume you are defending the administration, I must assume because I not sure the problems you mentioned cannot be referenced back to the administration. Now if you think I am opposed to higher oil prices think again. I have been angry with oil men since the 70's and unhappy with American attitudes that as soon as the price goes down, the "oil problem" is forgotten. I think the criticism of the Bush administration is appropriate, and very much on topic. Don't forget that higher gas prices put profits in the oilmen's pockets. Drilling in Alaska, IMO, only exacerbates the problem by giving more rigs to prosperous oilmen. Paying additional taxes on oil might make us more conservative, something Bush doesn't want--he approves of the SUV mania--uses more gas per mile.
iVillage Member
Registered: 05-02-2003
Thu, 05-27-2004 - 1:45pm
No I'm not defending anybody.

The USA has so many lobbyist they grease so many high political hands it's impossible to move forward. If the USA could focus it could do many many positive things but it's the same ole politics as usual and just pointing fingers and blaming someone for self gain.

The items I stated were not just with a Administration but a whole system of payoffs to all people in power to get a kickback of somekind and we as the people will always suffer.

Just look at the airlines, drug companies, oil companies, insurance companies, etc. etc. etc. they all make a killing of profits and thrive under every administration while the people pay.

iVillage Member
Registered: 04-16-2003
Fri, 05-28-2004 - 12:00pm
<>

Do you ever think the US's democracy has been lead astray? And we can't offer changes, because there is always a way aroung any change. Were politicians every noble? When did they become so self-serving. But that's OT, it is only tangentially related to our problems with OIL.