WASHINGTON, June 17 (UPI) -- The same day Saudi Arabia said it would boost production to record heights, global oil prices soared to a new world record of close to $140 a barrel.
The juxtaposition of those two facts should bury a lot of denial and myth-making about the causes of the long-term global energy shortage. But since most of the usual prognosticators in the U.S. media and the two main political parties will simply ignore the uncomfortable but very real lessons, we will point them out here.
First, the Saudis have shown that they are still ready to play ball with the Bush administration, and to do business with either Sen. John McCain, R-Ariz., or Sen. Barack Obama, D-Ill., when one of them is sworn in as the next president of the United States in January 2009.
Saudi Oil Minister Ali al-Naimi told U.N. Secretary-General Ban Ki-moon at a meeting in Jeddah Monday that by July Saudi production would be increased by an additional 200,000 barrels a day to an unprecedented 9.7 million barrels a day. This follows an earlier increase in May of 300,000 barrels a day, making an increase of a half-million barrels a day in less than three months. Saudi total generating capacity has never been as high.
Second, this in turn means fears circulated by Saudi-bashers that the Desert Kingdom's enormous and easily accessible, high-quality oil reservoirs are running dry appear to remain alarmist and unsubstantiated.
The Saudis are not pumping as if they had to conserve every barrel in the ground: They are pumping more than ever to try to prevent the world economy from going into a recession that would threaten their security as well as their long-term revenues. Unfashionable as it is to say it, Saudi oil management remains shrewd and responsible in the long term, while certainly operating from enlightened self-interest.
Third, the Saudis are simply less able to influence global oil prices, even though they retain indisputably the global swing producer position in the world economy that they have held now for more than 40 years. In fact, the very position of global swing producer is now weaker than it has been in more than a century since Texas started its two-thirds of a century role after the fabled strike at Spindletop in 1901 all the way through to 1967.
The reason for this is clear: It is not because global reserves of available oil are dangerously low -- they are not. And, again, it is not because the Saudi reserves are running dry. It is because, quite simply, the global demand for oil is greater than ever.
That demand is, obviously, fueled by the rising demand curves in China and India, though once again, one should remember that at around 6 billion a barrels per year, China's oil consumption remains less than one third of the United States' 20 billion barrels per year, even though the United States has "only" 300 million people and China has a population four and a half times bigger.
There are two human-level major bottlenecks in global oil supply that U.S. policymakers in both parties, and in both the Executive Branch and Congress, ought to prioritize and they have not:
The first is the shameful and inexplicable reluctance of U.S. policymakers to accelerate oil refining capacity. Obama and McCain have both pledged to pour hundreds of billions of dollars into romantic "green" alternative energy research, most of which, history suggests, will be a waste of time: Neither of them so far shows any sign of giving the refinery problem the priority it deserves. Obama's pledge to tax the oil companies hard, on the contrary, will be a huge disincentive for them to build refineries and will just make the current problems far worse and drive basic energy prices far higher.
Second, U.S. policymakers need to prioritize policies to ensure security and free oil production in regions where they remain heavily impaired. Iraq is an obvious priority, but Nigeria is also extremely important. Nigeria's oil production is around 25 percent below where it ought to be because of ethnic conflict, violence and general instability in the Niger Delta.
These points are very simple and basic: In any college course they would come under "Oil 101." Unfortunately the American public, their media and their policymakers are all so woefully ignorant of the real issues that this is where real education still has to start.
