The Political Theatre of Oil
President Bush visited Saudi Arabia on Thursday to beg the leader of the world’s leading oil-producing nation to open the spigots—in an attempt to provide price relief at the gas pumps back home. But days before he arrived, Bush himself characterized the act as an empty gesture. “When you analyze the capacity for countries to put oil on the market, it’s just not like it used to be,” said Bush on Monday. “The demand for oil is so high relative to supply these days that there’s just not a lot of excess capacity.”
While it is widely viewed that the Saudis are holding back production to about 80 percent of its capacity in order to maintain record oil prices, some observers question the Saudi’s ability to increase production—even if desired. “The myth of Saudi spare capacity is convenient for everybody: it gives OPEC leverage, and it gives the West hope,” said Chris Skrebowski, Editor of Petroleum Review. “Saudi reserves are secret. They have never been verified.” Even if Saudi Arabia could raise production by 20 percent, it wouldn’t be long before an increase would be overshadowed by surging demand on the world market.
Congress also played its part in the political theater of oil dependence this week. The House of Representatives passed a bill on Wednesday to halt the stockpiling of crude in the Strategic Petroleum Reserve until prices fall back to $75 dollars a barrel. The White House promised not to veto such legislation. The bill would add 70,000 barrels of oil a day to the global market, but with global demand at around 86 million barrels per day, most energy experts expect it to have little impact on gas prices.
Another bill would freeze four highly sought-after arms deals, including a $123 million shipment of laser-guided smart bomb kits that would give Saudi airstrikes pinpoint accuracy. Another would give U.S. prosecutors the authority to apply U.S. antitrust laws to oil-producing countries.
While the U.S. made idle threats, Saudi Oil Minister Ali al-Naimi—the most influential voice in OPEC—dismissed the issue of Saudi production levels as irrelevant. Al-Naimi said, “The short-term oil price gyrations seen in recent years are more closely tied to the internal logic of the financial markets than to underlying supply/demand fundamentals.” OPEC ministers have regularly blamed increased speculative trading, the weakening U.S. dollar and other factors beyond their control for the rapid rise in oil prices, which have quadrupled in the past five years.
Bush’s visit to Saudi Arabia coincides with the beginning of this year’s peak driving season in the United States—when gas prices are expected to exceed $4 a gallon throughout the country.