Posted on 05/06/2004 9:00:54 AM PDT by .cnI redruM
HEALDSBURG, Calif. (CBS.MW) -- As the price of crude oil keeps rising toward $40 a barrel and beyond, it has become increasingly clear that the world is heading toward a major oil crisis -- in terms of both price and supply -- that will dwarf that of 1973.
There can be no doubt that the fall of the House of Saud would be thrust the entire Western world into an energy crisis of unprecedented proportions.
For many of us who have been observers of global energy trends for what now amounts to decades, this has become not a matter of "if" but rather one of "when." We are facing a convergence of three forces that will have a potentially explosive effect on the market for crude oil.
They are:
1. A growing geopolitical crisis in the Middle East, which is now threatening to spread beyond Iraq to Saudi Arabia, the world's largest producer and exporter of crude oil.
2. A surge in global demand for energy and particularly crude oil and its derivatives, fueled by the recovery of both the American and Japanese economies and the unprecedented growth of China, which has just replaced Japan as the world's second largest consumer of crude oil.
3. A structural deterioration of the world's oil supply. What is involved here is nothing short of an imminent peaking out of production of crude oil on a global basis -- known by energy industry insiders as "Hubbert's Peak" -- which would turn a cyclical supply/demand crisis into a structural energy crisis of unprecedented proportions.
This is the first a series of articles dealing with this pending crisis and its potential impact on our economy and financial markets
Where the role of geopolitical events on the price and supply of crude oil is concerned, the early warning signals of a major crisis are now coming in every week. In late April it came in the form of a terrorist attack on the Persian Gulf oil terminal through which 90 percent of Iraq's crude oil exports flow. The attack forced the temporary shutdown of the facility. This event merely adds to the mounting evidence that those who have been trying to convince us that Iraq will soon reassume its role is a major supplier of oil to the world market -- as much as 3.5 million barrels a day this year, and 5 million barrels per day within five years -- have been leading us down the garden path.
As a result of the disastrous security situation prevailing in Iraq, all attempts at restoring the output potential of its oil field have now been put on an indefinite hold. Even the first $20 billion dollars of funding originally committed to needed repairs of the facilities there has been cancelled. The sad truth is that in the foreseeable future Iraq will supply less crude oil to the world market than it did before the war.
But compared to what could happen inside its neighbor to the south, all this barely deserves a footnote. The first indications that the supply of oil from the entire Mideast may be on the edge of implosion are now beginning to take on concrete and unmistakable form.
I refer here to the massacre of five employees of the Swiss-based ABB who had been contracted out to run a petrochemical a joint venture of Exxon Mobil and Saudi Basic Industries Corp in Saudi Arabia. It was an inside job. Their killers were Saudi nationals who worked there. This prompted the US ambassador to Saudi Arabia to urge all US nationals -- numbering in the tens of thousands -- to leave the country immediately, because neither the kingdom nor the United States can guarantee their security. This represents a retreat by the United States of historical proportions.
Since World War II, our country has essentially acted as a protectorate of the rulers of Saudi Arabia, the House of Saud, in return for that nation's commitment to act as the great stabilizer of both the supply and price of crude oil in the global market for this key commodity. Saudi Arabia is uniquely able to play such a role, since it is universally recognized as the world's key "swing" producer of crude oil. On average its output of 8 million barrels a day accounts for 10 percent of the world's supply of crude petroleum, almost all of which is exported. But what is perhaps even more significant, Saudi Arabia is in a position to increase output and exports to 11 million barrels a day almost overnight should a supply crisis occur elsewhere in the world.
Were, however, the rulers of this supplier of last resort be brought down by the revolutionary forces of the Islamic Fascists whose numbers seem to be increasing geometrically inside Saudi Arabia, their first step as the nation's new rulers would be to suspend all oil exports, demonstrating for all to see the ultimate power which Islam wields over the West.
For there can be no doubt whatsoever that the fall of the House of Saud would be thrust the entire Western world into an energy crisis of unprecedented proportions. Lest there be any doubt about this, as Larry Goldstein, president of the Petroleum Industry Research Foundation told the Wall Street Journal this week: A disruption of Saudi oil supplies is "one event to which no one has an answer."
As will be described in the next article in this series, such a supply crisis could hardly come at a worse time. The world's dependence on oil is spiking with the revival of economic growth in the U.S. and Japan, and the emergence of China as a major competitor for the limited supply of petroleum, even as all attempts to introduce energy conservation on a major scale have been essentially abandoned.
LOL! Funniest thing I've read all week!
btw- When is the next spotted owl shoot?
I forgot to sign up for the mailing list at the last one.
Fat, dumb, and happy, the US has resumed its energy guzzling ways. The libs also understand that the only thing that will cause a major upheaval in the country is a energy crisis, and have moved to block every effort to ease the dependences on oil imports.
History tell us that countries can remain stable in famine, wars, plague, but cannot survive rampant inflation. When the ME shuts off the oil tap inflation will go through the roof and the Hunts of the world will try to corner the basic materials markets.
If these "Islamic Fascists" were to suspend all oil exports, they would lose the only real source of revenue their nation has. I don't know anyone with an IQ over 30 who thinks this would be an effective career move.
Refusing to export your only commodity on ideological grounds is about as effective as jumping off a bridge to protest the terrible impact that gravity has on us.
ANWAR is a tiny place in Alaska.. Most of Northern Alaska is dripping with oil, not only ANWAR. Actually theres oil in Alaska that nobody knows of yet. Its on federal lands which are off limits. Not to speak of the natural gas and almost an entire state of untapped COAL veins everywhere. Coal washes up at many beaches and is used for campfires.
And Alaska is almost as big as the western United States, far bigger than Texas. A huge untapped reservoir of energy. UNTAPPED.?.. Compared to whats there,, YES..
It's only the second most plentiful liquid on earth!
Baloney. Do some research on the annual figures posted by the U.S. Department of Energy, and you'll be surprised at how little oil the U.S. gets from Saudi Arabia. One of the most enduring trends in this area over the last 30 years has been a shift in U.S. oil imports away from the Middle East and toward Western Hemisphere producers like Venezuela, Canada and Mexico and toward non-OPEC producers in Africa like Nigeria.
The only reliance we have on the "sand people" is from a pricing perspective. The U.S. "relies" on foreign oil for the same reason we "rely" on bananas from South America, manufactured goods from China, and landscapers from Mexico -- because these are the cheapest sources of these things.
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