by Dr Michael Saba

22-11-04

First of all, let's get one thing straight. Saudi Arabia doesn't "produce" oil", it extracts it. Any country's "oil production" is really its oil extraction. That one phrase alone -- "produce oil" -- has created real havoc in world political and economic circles.

As Youssef Ibrahim, a former senior Middle East correspondent with the New York Times and energy editor of the Wall Street Journal has said, "Oil and politics are a flammable cocktail".

During the very heated 2004 presidential season, Saudi Arabia and the Middle East played a major role in the political campaigns of both major presidential campaigns. Though many observers would say that George W. Bush was not even-handed in his positions on Middle East issues and that he often seemed to serve as a pawn for Israeli Prime Minister Ariel Sharon, John Kerry took even more extreme positions on most issues related to the Middle East.

A cornerstone in Kerry's presidential campaign was the imperative in his national security policy -- "Free America from its dangerous dependency on Mideast (read Saudi Arabia and the Gulf) oil". Kerry went on to state, "Today, we consume 2.5 mm bpd of oil from the Middle East whose instability has pushed prices to record highs. These soaring energy costs are burdening middle class families with higher gas prices and dependence on Middle East oil is putting our national security at risk".

Kerry also stated during his campaign speeches, "Letting the Saudi royal family control our energy costs makes President Bush unfit to lead the nation". Was this just political rhetoric? Let's look at the data regarding energy and oil and see what some of the experts have to say.
Most energy statisticians state that about 2/3 of the world's proven oil reserves are in five Gulf countries -- Saudi Arabia, Iraq, Iran, Kuwait and the United Arab Emirates. According to Hassan Al Husseini, a Saudi oil consultant, 25 % of the world's oil is in Saudi Arabia and Saudi Arabia extracts about 12 % of the world's daily oil usage. The United States with about 5 % of the world's population uses about 25 % of the world's oil. And the US consumes almost 50 % of the world's gasoline daily. Where does that oil come from and how dependent are we on "Mideast oil"?

First, let's go back to the basics. This explanation by Caltech vice provost and professor of physics, David Goodstein, puts it very succinctly.
"Oil was created when so-called source rock, full of organic inclusions, sank deep within the earth. The inside of the earth is heated by natural radioactivity, and the deeper you go, the hotter it gets.”
“This source rock sank just deep enough into the heated interior for the organic matter to get cooked into oil. Rock that sank deeper got overcooked and became natural gas. Rock that sank to a more shallow level became shale oil, which is essentially unborn oil that can be made into a fuel by strip-mining, crushing, and heating the rocks until you generate a usable liquid. People who have invested many millions of dollars into trying to exploit this resource have come to the conclusion that it will probably always be energy-negative, meaning that you will always have to put more energy into acquiring and processing it than you will ever get out of it."

The Arab Gulf happened to have many of the right conditions for the creation of oil and natural gas. But those conditions also existed in other countries throughout the world. Some of those countries include Canada, Mexico, Venezuela and the United States itself. According to the latest statistics, the US extracts about 38 % of its own oil usage from inside the United States. The next three largest suppliers to the US are Canada, Mexico and Venezuela. Saudi Arabia comes in 4th as an exporter of oil to the US and supplies us with a little over 7 % of our domestic usage.
John Kerry didn't mention "our dangerous dependency on Western Hemisphere oil". Though our oil imports fluctuate regularly amongst different countries, in many ways the US is less dependent now on Middle East and Saudi oil than in past years. At the same time, Saudi Arabia has turned eastward for its oil exports and China, now the second leading oil importer, is a major consumer of Saudi oil.

In a recent article by John Cassidy in the "New Yorker" magazine titled "Pump Dreams", the issue of US energy dependence is discussed. Cassidy states, "By 2020, according to the Department of Energy, domestic oil producers will be meeting less that a third of United States needs and the Gulf countries will be supplying up to two-thirds of the world's oil".
Cassidy also points out that the US has now slipped to tenth place in the world in terms of proven oil reserves. Cassidy also says, "Contrary to popular belief, the OPEC cartel, led by Saudi Arabia, no longer controls the price of oil, and hasn't done so since 1986 when the price collapsed." He goes on to say that the price of oil is now determined by supply and demand operating through the futures market in New York or London, where oil is traded like any other commodity.

So the US is not currently that dependent on Middle East oil though it may very well be in the future. And Saudi Arabia and OPEC are no longer calling the shots for the price of oil.
John Kerry was wrong. However, post-election realities are about to set in. And Saudi Arabia and its energy will likely play a key role for President Bush and his successors for many years to come. As former US Ambassador to Saudi Arabia, Charles Freeman said, "After the election, whoever wins is going to have to govern." He continued that whoever governs is going to have to deal with Saudi Arabia and common concerns. He said, "This means energy security in which Saudi Arabia plays a key role." He ended his comments by saying that after the elections some effort must be made for Americans and Saudis to sit down and "reassess and redefine the relationship... or the relationship will in fact drift permanently into a mutually disadvantageous mode."

Dr Michael Saba is the author of "The Armageddon Network" and is an international relations consultant.

Source: Arab News