The Oily Maze: The Oil-rich Arab
Leaders Still Disappointingly Unable
To Convince The World On Failure
Posted By George S Hishmeh
June26, 2008
One would think that Arab leaders would have learned a lesson
(or two) after failing to tell the Arab side of the conflict
with Israel since the establishment of the Jewish state on Arab
lands in Palestine in 1948, a loss the Arabs describe as the
Nakba or catastrophe.
Once again the oil-rich Arab leaders are disappointingly unable
so far to convince the world of the reasons, as they see them,
that led to the skyrocketing price of oil which had more than
doubled in one year; now over $140 a barrel.
A key issue in telling the Arab side of the story or argument is
the audience, a point Arab officialdom often hardly fathom. Arab
officials are of the opinion that their American counterparts
are the ones they need to convince.
This may be so in some cases but more often than not, the
American public and the media as well as think tanks and
university audiences are equally important, if not crucial.
Take the case of the top issue that is now on the table - oil -
where Saudi Arabia is the world's largest exporter, followed by
either Iran or Iraq. Several Arab states are also in this
league: Qatar, Kuwait, United Arab Emirates, Libya and Algeria.
At present Saudi Arabia, an American ally, is under "intense
pressure" from Washington, and hardly a day passes when it is
not badgered in the media over the price of oil, now reaching a
little over $4 a gallon in the US, which is actually less than
half of what Europeans are paying.
There is a public and sharp disagreement between producers and
consumers over the reasons for the "oil shock", other than the
obvious increase in demand from China, India and the
neighbouring Arab countries, as well as in the sharp fall of the
value of the dollar.
Saudi Arabia's explanation came at the hastily organised
international meeting of oil producers and consumers in Jeddah
which was attended by British Prime Minister Gordon Brown and
the US Energy Secretary Samuel Bodman.
According to Saudi Arabia's Petroleum and Mineral Resources
Minister Ali Al Naimi, the global supply of oil exceeded
"substantially" global demand between the second quarter of 2007
and the same period in 2008 by nearly double the amount, from a
minimum of 800,000 barrels a day to a maximum 1.6 billion
barrels.
"Clearly something other than supply and demand fundamentals
[are] at work here, and a simplistic focus on supply expansion
is therefore unlikely to tame the current price behaviour," he
stressed.
More to the point, King Abdullah cited several factors that were
driving "the unjustified, swift rise in oil prices [including]
speculators who play the market out of selfish reasons", plus
higher consumption by developing countries and higher taxes in
some countries.
But the US energy secretary argued that US officials had found
no evidence that speculators are driving up prices.
However, the joint statement issued at the end of the conference
attended by delegates from 36 countries and executives of 25 oil
companies called for improved transparency and regulation of
financial markets.
Adding to the confusion were tensions in the region,
particularly The New York Times report that quoted US officials
as saying Israel had carried out a large military exercise in an
apparent rehearsal for a potential bombing of Iran's nuclear
facilities.
If this were to take place, one certain result is that 40 per
cent of the world's oil would not be able to pass through the
Straits of Hormuz, a narrow waterway separating Iran from the
Arabian Peninsula.
The report, which surprisingly did not precipitate any anxiety
in the Western world, triggered a $3 raise in the price of oil.
Last week's increase in oil prices was not the first that was
caused by tensions between Israel and Iran.
Haaretz reported that "oil prices soared to $11 on June 6 after
the former Israeli Defence Forces Chief of Staff and
Transportation Minister Shaul Mofaz said in a newspaper
interview that 'if Iran continues with its programme for
developing nuclear weapons, we will attack it. The sanctions are
ineffective'."
In this oily maze, Saudi Arabia ought to take the lead in
explaining its views world wide in an elaborate and
sophisticated media campaign, alongside a wide speaking tour by
its officials in the US and Europe, that addresses issues
bluntly such as the need for expanding US oil refining capacity.
The fact that Saudi Arabia's pledge at the Jeddah conference to
increase, in the next few days, its supply of oil to a record
9.7 million barrels a day (and up to 12.5 million barrels a day
in 18 months) had little effect on the market must be raising
eyebrows everywhere.
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