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The
world’s largest producer of petroleum would be the last
country one would expect to be troubled by skyrocketing
fuel prices. At a time when 60 percent of what the rest
of humanity pays for gasoline, diesel, kerosene and
other oil byproducts goes to its coffers, Saudi Arabia,
along with other oil producers, should be the least
concerned—or should it?
In a
global economy where “what goes around comes around,”
the Saudis and other members of the Organization of
Petroleum Exporting Countries (Opec) must realize that
they are not immune from the economic dislocation
triggered by rising fuel prices. After all, sizable
chunks of their oil earnings are invested in precisely
those countries that are now reeling from the oil-price
shock.
It was
not out of any sense of altruism that Saudi Arabia has
announced it would call for a meeting of Opec members
and oil-consuming countries in order, according to an
Associated Press dispatch from Riyadh, to discuss
soaring oil prices and work to prevent unjustified rise
in prices.
The
Associated Press quoted Saudi Information Minister Iyad
Madani as saying the kingdom will work with Opec to
“guarantee the availability of oil supplies now and in
the future.”
The
state of their investments in the oil-consuming
countries may have begun to weigh heavily on the
collective mind of oil producers. However, they are
probably also worried that high oil prices have
stimulated the development—and acceptability—of
alternative energy sources, which are clean and
renewable.
Necessity, as the old saw goes, is the mother of
invention. Plentiful now are the proposals on how
non-oil producers could finally end their dependence on
imported petroleum. Initially, those alternatives would
require huge capital outlays, but rising petroleum costs
have only made investments in renewable energy now seem
economical—and, in the long run, wise.
Some
quarters would argue that what the Saudis really fear is
the erosion of oil’s importance to the global energy
mix. Like drug pushers who see a growing number of their
customers beginning to show the willpower to kick the
habit, the oil producers will try to retain their
oil-addicted clientele by bringing oil prices back to
“reasonable” levels.
But even
the most optimistic proponents concede that widespread
use of such alternative energy sources as solar and
wind, as well as hydrogen-based fuel cells to power
motor vehicles, is still some ways off. The world will
continue to rely on fossil fuels, such as oil and coal,
for years to come.
So what
has got the Saudis and other oil producers suddenly
concerned?
Late
last month the US Senate judiciary committee summoned
top executives of such companies as BP America, Shell,
Chevron, Conoco Philips and Exxon Mobil for what was
expected to be a dressing down of the oil industry in
full view of Americans suffering from skyrocketing fuel
prices. However, the hearing merely underscored how much
oil reserves the United States still has.
Moreover, the oil executives also managed to bring out
the message that if the US government were to ease up on
policies that currently restrict the tapping of those
humongous reserves, fuel prices would quickly fall—not
only in America, but also in the rest of the world.
The oil
executives cited data from the US Department of the
Interior, which show that 62 percent of all onshore
federal lands are off limits to oil-and-gas development,
with restrictions applying to 92 percent of all federal
lands. The
US government enforces outer-continental- shelf moratoriums on
the
Atlantic
Ocean, the Pacific Ocean and the eastern Gulf of Mexico.
There are US congressional bans on onshore oil-and-gas
activities in specific areas of the Rockies and Alaska,
and even a congressional ban on doing an analysis of the
resource potential for oil-and-gas in the Atlantic,
Pacific and eastern Gulf of Mexico.
Federal
restrictions, the oil executives said, have forced the
United States to import 60 percent of its daily oil
needs.
Many of
these policies were adopted at a time when, as one oil
executive put it, “oil was selling in the single digits,
not the triple digits we see now.” In all, these
policies have discouraged US investment and sent US
companies outside the
United States
to source new supplies—to the immense profit of Opec
members like Saudi Arabia.
During
the exchange between the US senators and oil executives,
other crucial information surfaced: Aside from America’s
proven oil reserves, the states of Utah, Colorado and
Wyoming have reserves of between 800 billion to almost 2
trillion barrels of oil, which could be recovered at a
cost of between $30 and $40 a barrel. Even if recovery
costs reach $100 a barrel, a good bargain could be still
be had—compared with Opec oil, which, as of this
writing, is approaching $150 a barrel.
If US
policymakers were somehow persuaded to lift, or at least
loosen, the restrictions on the development of their own
country’s domestic oil resources, the Saudis and the
rest of Opec would soon see their petrodollar earnings
evaporate.
The
Saudis’ evident bid to rein in rising oil prices could,
in the short term, bring some relief to oil
consumers—whether in the United States or in the
Philippines. It may persuade US politicians to retain
federal restrictions on US oil reserves. Yet, in the
back of our mind is the feeling that rising oil prices
may not be entirely bad, if only because expensive
petroleum is finally making the world understand that it
has had enough of Opec profiteering.
Besides,
whether or not the US finally taps its strategic
reserves, oil would ultimate run out. Better to quit
cold turkey now than suffer through a protracted
“transition” to renewable energy later. |
