Editor's Note:
In view of the current crisis
in global energy costs, Saudi Arabia will be hosting a meeting on June 22
among producers and consumers. SUSRIS is providing the following
editorial from Arab News from yesterday and a Special
Section
on the oil crisis as background material.
Editorial: Rise in oil price: Fact and fiction
Arab News
June
17, 2008
Following fast on the decision to boost oil production this month by 300,000 b/d, the Kingdom is to increase this by a further 200,000 b/d next month in the hope of bringing some sanity to an out-of-control market. Given that supply already exceeds demand, this should push down the price. We say, �should�. The fact is that no one knows if it will. The 300,000 b/d rise initially seemed to have stabilized the market but it was hoped it would do more and yesterday, despite the further announcement, prices hit fresh highs. The fact is that with speculators forcing up the price ever higher in order to scoop up profits, production increases are going to have limited effect. Producers no longer have the wherewithal to end this irresponsible destabilization of the market. No one, however, can say that Saudi Arabia is not acting responsibly or decisively -- although that is precisely what the media in some countries has been trying to claim in the past few weeks. The way Saudi oil policy has been presented in the US media in particular has been little short of dishonest. The Kingdom was accused of refusing President Bush�s requests to pump more oil, the inference being that it is happy with sky -- high prices. The 300,000 b/d increase was ignored and the explanation that demand for extra oil is not there was clearly considered a feeble excuse. Quite clearly the Saudi-bashers thought that the Kingdom should flood the market. But Saudi Arabia cannot go overboard. It wants the price down, but equally it cannot go for overkill. A sudden massive hike -- say, by million barrels a day -- would have seen prices going through the floor. That would be just as destabilizing as the present situation.
Saudi Arabia is not alone as the target of consumer nations� anger and frustration; all the oil producers, or at least all the oil producers in OPEC, have come under attack. But that anger is misdirected.
The producers have certainly benefited, but the rise was not their doing. The speculators are not based in Riyadh or Dubai or Teheran or Caracas; they are based in the very places where the accusing media resides -- in London, New York, Tokyo, Singapore and the rest of the world�s major financial centers. Moreover, the producers are fully aware of the dangers of excessive prices. It will push consumers to look to other sources of energy. This week�s announcement by Honda that it has started production of the first car to run on hydrogen and electricity is a sign of things to come.
By increasing output by half a million b/d, Saudi Arabia is doing its best to bring down prices. What about the governments of consumer countries where rocketing prices have triggered strikes, in turn causing petrol shortages? With the tax take on petrol based on the price of oil, they have been raking the money in. In Europe, for example, the tax take on a liter of petrol is as much as 70 percent. Consumer governments could reduce it and thereby the price of petrol to the levels they anticipated when they drew up their 2008 budgets. In refusing to do so, they make themselves as much part of the problem as the speculators.
Saudi Arabia has acted responsibly in the interest of economic stability; why cannot they?
Source: Arab News
Related Items:
