Sunday, June 22, 2008
Saudi Arabia Boosts Oil Supply, May Pump More Later
By Ayesha Daya and Glen Carey
June 22 (Bloomberg) -- Saudi Arabia may raise its oil production beyond a planned 200,000 barrel-a-day increase in July if the oil market requires extra supply, Saudi Oil Minister Ali al-Naimi told consumers at a summit in Jeddah.
Saudi Arabia's commitment to government and business leaders to pump 9.7 million barrels a day next month came after crude rose to a record $139.89 in New York on June 16. Saudi King Abdullah said at today's summit that his country, the world's biggest oil exporter, seeks ``reasonable'' prices. OPEC President Chakib Khelil said a Saudi boost is ``illogical'' because refiners don't need more crude.
The International Energy Agency estimates that world oil use this year will climb 800,000 barrels a day, or 1 percent, as demand climbs in emerging markets. Stagnating production from Russia and the North Sea and disruption in Nigeria are also contributing to higher prices, which have touched off strikes, riots and accelerating inflation in nations around the world.
``Saudi Arabia is prepared and willing to produce additional barrels of crude above and beyond the 9.7 million barrels per day, which we plan to produce during the month of July, if demand for such quantities materializes and our customers tell us they are needed,'' Naimi said.
Saudi Arabia's capacity will be 12.5 million barrels a day by the end of 2009 and may rise to 15 million after that if necessary, he said.
The president of the Organization of Petroleum Exporting Countries, Khelil, blamed $135 oil on speculative investors, the subprime credit crisis and geopolitics, rather than a shortage of supply. Khelil, who is also Algeria's oil minister, today dismissed the argument voiced by consuming nations that possible supply shortages are driving up prices.
``The concern over future oil supply is not a new phenomenon,'' he told reporters in Jeddah. Asked if oil prices would fall after the meeting, he replied: ``I don't think so.''
More than 35 countries, seven international organizations and 25 oil companies took part in today's summit in the Saudi Red Sea port, including U.K. Prime Minister Gordon Brown, U.S. Energy Secretary Samuel Bodman and Exxon Mobil Corp. Chief Executive Officer Rex Tillerson.
The Saudi King and other producer-nation officials including Kuwaiti oil minister Mohammed al-Olaim also called for greater regulation on oil market investors. The U.S. Commodity Futures Trading Commission is currently investigating the role of index-fund investors in the doubling of oil prices during the past year.
OPEC itself is divided. While Saudi Arabia is boosting output, other OPEC members including Libya, Algeria, Iran, Venezuela and Qatar are opposed to higher production, saying refiners aren't asking for more crude.
Libya's top oil official, Shokri Ghanem, said after the meeting ended that the Saudi output boost wouldn't affect the oil price, and yesterday said his country may have to cut its own production in response to the Saudi move.
Venezuelan Oil Minister Rafael Ramirez, also asked whether the oil price was likely to fall after the Saudi move, said: ``I don't think so because it's not a problem of supply.''
Kuwait, OPEC's fourth largest producer, said it's ready to join neighboring Saudi Arabia and raise output, if needed.
Oil rose to $139.89 a barrel on June 16 as investors bought commodities to hedge against a weakening U.S. dollar and concern mounted that demand is growing faster than supply. Gasoline retail prices over $4 a gallon in the U.S. are raising concern that the economy may slip into recession. Crude oil for July delivery closed June 20 in New York at $134.62 a barrel.
U.S. Energy Secretary Bodman rejected calls to put greater control on markets, and said a shortage of supply was responsible for high prices. He disputed the view that speculators are leading the markets to record levels.
The market needs between 3 million and 4 million barrels a day of spare oil production capacity, compared with the 2 million barrels a day currently available, Bodman said. OPEC says the world's spare capacity is about 3 million barrels a day, with two-thirds of that in Saudi Arabia.
``Market fundamentals show us that production has not kept pace with growing demand for oil resulting in increasing, and increasingly volatile, prices,'' Bodman said in a speech today.
Italy's Minister of Industry Claudio Scajola and Brazil's Energy Minister Edison Lobao were among consumer-nation officials attending the Jeddah summit that said more supply was needed to ease prices. ``We expect Saudi Arabia to open the taps,'' Austrian Economy Minister Martin Bartenstein said in an interview two days ago. ``One third of inflation in the euro zone comes from energy and inflation is now of importance.''
Speaking in Jeddah today, the Austrian minister said: ``We would like to see more oil on the market. That is the only action I can think of that can discourage the speculators.''
Adam Sieminski, chief energy economist at Deutsche Bank AG, and other analysts maintain that consumers will need to curtail demand before prices head lower. The biggest drop in prices in 11 weeks came on June 18, after the world's second-biggest oil consumer, China, raised gasoline, diesel and power prices to rein in energy use.
Saudi Arabia will increase production capacity to 12.5 million barrels a day of oil by the end of next year and could add a further 2.5 million barrels a day if needed, from some new giant fields, Naimi said.
Zuluf, Shaybah Fields
``The Saudi announcement of a possible increase in capacity to 15 million barrels a day is a robust statement; it would be a huge increase,'' ENI SpA Chief Executive Officer Paolo Scaroni said in an interview in Jeddah today. ``The world is worried about the shortage in spare capacity and any improvement will change this sentiment.''
The further daily capacity includes 900,000 barrels from the Zuluf field, 700,000 barrels from Safaniyah, 300,000 barrels from Berri, 300,000 barrels from Khurais and 250,000 barrels from Shaybah, Naimi said.
U.K. Prime Minister Brown said in Jeddah today he will open Britain's energy industry to investment from oil producing nations as a way of keeping a lid on crude prices and paying for measures to clean up the environment. Further talks may be held between producers and consumers this year in London, he said.
To contact the reporters on this story: Ayesha Daya in Jeddah firstname.lastname@example.orgGlen Carey in Jeddah email@example.com Last Updated: June 22, 2008 12:12 EDT
June 22, 2008
Mr. Bush, Lead or Leave
By THOMAS L. FRIEDMAN
Two years ago, President Bush declared that America was “addicted to oil,” and, by gosh, he was going to do something about it. Well, now he has. Now we have the new Bush energy plan: “Get more addicted to oil.”
Actually, it’s more sophisticated than that: Get Saudi Arabia, our chief oil pusher, to up our dosage for a little while and bring down the oil price just enough so the renewable energy alternatives can’t totally take off. Then try to strong arm Congress into lifting the ban on drilling offshore and in the Arctic National Wildlife Refuge.
It’s as if our addict-in-chief is saying to us: “C’mon guys, you know you want a little more of the good stuff. One more hit, baby. Just one more toke on the ole oil pipe. I promise, next year, we’ll all go straight. I’ll even put a wind turbine on my presidential library. But for now, give me one more pop from that drill, please, baby. Just one more transfusion of that sweet offshore crude.”
It is hard for me to find the words to express what a massive, fraudulent, pathetic excuse for an energy policy this is. But it gets better. The president actually had the gall to set a deadline for this drug deal:
“I know the Democratic leaders have opposed some of these policies in the past,” Mr. Bush said. “Now that their opposition has helped drive gas prices to record levels, I ask them to reconsider their positions. If Congressional leaders leave for the Fourth of July recess without taking action, they will need to explain why $4-a-gallon gasoline is not enough incentive for them to act.”
This from a president who for six years resisted any pressure on Detroit to seriously improve mileage standards on its gas guzzlers; this from a president who’s done nothing to encourage conservation; this from a president who has so neutered the Environmental Protection Agency that the head of the E.P.A. today seems to be in a witness-protection program. I bet there aren’t 12 readers of this newspaper who could tell you his name or identify him in a police lineup.
But, most of all, this deadline is from a president who hasn’t lifted a finger to broker passage of legislation that has been stuck in Congress for a year, which could actually impact America’s energy profile right now — unlike offshore oil that would take years to flow — and create good tech jobs to boot.
That bill is H.R. 6049 — “The Renewable Energy and Job Creation Act of 2008,” which extends for another eight years the investment tax credit for installing solar energy and extends for one year the production tax credit for producing wind power and for three years the credits for geothermal, wave energy and other renewables.
These critical tax credits for renewables are set to expire at the end of this fiscal year and, if they do, it will mean thousands of jobs lost and billions of dollars of investments not made. “Already clean energy projects in the U.S. are being put on hold,” said Rhone Resch, president of the Solar Energy Industries Association.
People forget, wind and solar power are here, they work, they can go on your roof tomorrow. What they need now is a big U.S. market where lots of manufacturers have an incentive to install solar panels and wind turbines — because the more they do, the more these technologies would move down the learning curve, become cheaper and be able to compete directly with coal, oil and nuclear, without subsidies.
That seems to be exactly what the Republican Party is trying to block, since the Senate Republicans — sorry to say, with the help of John McCain — have now managed to defeat the renewal of these tax credits six different times.
Of course, we’re going to need oil for years to come. That being the case, I’d prefer — for geopolitical reasons — that we get as much as possible from domestic wells. But our future is not in oil, and a real president wouldn’t be hectoring Congress about offshore drilling today. He’d be telling the country a much larger truth:
“Oil is poisoning our climate and our geopolitics, and here is how we’re going to break our addiction: We’re going to set a floor price of $4.50 a gallon for gasoline and $100 a barrel for oil. And that floor price is going to trigger massive investments in renewable energy — particularly wind, solar panels and solar thermal. And we’re also going to go on a crash program to dramatically increase energy efficiency, to drive conservation to a whole new level and to build more nuclear power. And I want every Democrat and every Republican to join me in this endeavor.”
That’s what a real president would do. He’d give us a big strategic plan to end our addiction to oil and build a bipartisan coalition to deliver it. He certainly wouldn’t be using his last days in office to threaten Congressional Democrats that if they don’t approve offshore drilling by the Fourth of July recess, they will be blamed for $4-a-gallon gas. That is so lame. That is an energy policy so unworthy of our Independence Day.
Our energy policy is such a joke. It is worth remembering that Increase in Prosperity if directly proportional to increase in energy available and increase in energy efficiency.