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Bush's Man Date
I'm going to outsource my thoughts on the Bush-Saudi love-in to Justin Logan who, I think, says what needs to be said. But let me also add that the whole spectacle of an American President begging the Saudi monarchs to lower oil prices is bizarre and repugnant, especially in light of the fact that there's no reason whatsoever to believe that the Saudi government actually has the capacity to do this. Oil is going to be generally more expensive over the next while than it was during the late 1980s and 1990s. It may go up or down a bit thanks to this or that gambit (Bush's Saudi ploy, the Democrats' hackneyed Strategic Petroleum Reserve proposal) but fundamentally it's something we need to start dealing with, rather than whining about. If cars were more fuel efficient, then high oil prices wouldn't be so bad, and over time prices might start to fall. If we stopped relying on oil for electricity generation, that, too, would improve the situation.
April 26, 2005 | Permalink
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» Bush offers sex for oil??? from bennellibrothers.com
In the latest attempt of Texas Oil Man and US President...Bushy tries to get lower oil prices for Americans from Crown Prince Abdullah and the other Saudi Despots by having a nice romantic walk through his garden.... Now if he... [Read More]
Tracked on Apr 26, 2005 3:59:46 PM
» Oil prices from Don't sweat the small stuff
I wholeheartedly agree with Matthew Yglesias, when he states: But let me also add that the whole spectacle of an American President begging the Saudi monarchs to lower oil prices is bizarre and repugnant, especially in light of the fact that there's no... [Read More]
Tracked on Apr 26, 2005 7:26:48 PM
Comments
But let me also add that the whole spectacle of an American President begging the Saudi monarchs to lower oil prices is bizarre and repugnant.
Well grow up and get used to it Matt, because this is what you do in a world in which other people actually do possess some power over you. I'm sure a lot of Saudis find it equally demeaning to view the spectacle of their leader having to trade oil in order to get the security guarantees necessary to keep their giovernment from falling. That's fucking life.
I have to say, I'm with Bush on this. Get a grip. Statesmen do indulge in the confidence-building customs of their partners on state visits, whether they are the visitors or the hosts. Hand-holding among men is fairly common in many parts of the world, not just the Middle East. Bush hung out with a lot of Arabs when he was a kid and has probably gotten used to it. You might as well criticize him for smiling or shaking hands or opening the door. (Now if only he could wear some of those funny-looking suits at Asian summits without making a face.)
Posted by: Dan Kervick | Apr 26, 2005 2:10:14 PM
Aside from everything else, jeebus kissing up to Abdullah makes Bush look like a pussy.
Posted by: bobo brooks | Apr 26, 2005 2:11:13 PM
A middle-aged guy perspective. I remember back in the 70s oil prices were never going down. They were going to climb forever and we were all going to die painful deaths. Then oil prices fell and stayed down for a long time. The low price crowd crowed all day every day about what idiots the forecasters of high prices had been. Low oil prices were here to stay, so get used to it. Now we're back to high oil prices, and they're never going down.
As for me, I never predict long-run oil prices. They might stay level, they might skyrocket, they might plummet. I haven't a clue -- and neither do most or all analysts.
Also, oil for electricity generation is relatively minor. Not much bang for the buck there.
Posted by: ostap | Apr 26, 2005 2:18:06 PM
It is illegal to hold Christian services in Saudi Arabia. They arrested a minister and 40 followers over the weekend for holding services...
Maybe if America agrees to convert to Islam the Saudis would lower oil prices a few bucks a barrel.
Posted by: monkyboy | Apr 26, 2005 2:25:36 PM
One fact that strikes me as hugely underreported is the fact that any additional Saudi oil is mostly high sulfur so-called sour crude that is not even suitable for many refineries.
Saudi extra barrels wrong kind of crude
“Most refiners couldn’t take more sour if they tried,” said one refiner, who asked not to be named.
“We have a glut of sour crude and a short supply squeeze on low-sulfur crude oil and products, so extra Saudi makes no difference whatsoever,” a physical oil trader said.
Some degree of substitution is going to happen when Saudi Arabia releases more oil, and it will lower prices on all forms of crude. But how is it that we can even have this discussion without reference to the above fact?
This seems to be one of those cases in which the news media and punditry are so entranced by the personal and political aspects of the story, that they overlook basic factual details.
Posted by: Paul Callahan | Apr 26, 2005 2:26:36 PM
It may go up or down a bit thanks to this or that gambit (Bush's Saudi ploy, the Democrats' hackneyed Strategic Petroleum Reserve proposal) but fundamentally it's something we need to start dealing with, rather than whining about.
Exactly. Deal with it. And the reserve proposal is such nonsense, it makes me wonder why Dems are doing it. If its just lip service, fine, although I'd prefer them to keep their lips shut unless they have something useful to say.
This is NOT a crisis. Its a squeeze. No need to open up those reserves unless we reach an actual crisis.
Posted by: Adrock | Apr 26, 2005 2:28:26 PM
Mr. Ostap,
I agree completely re power generation. It is a very common misunderstanding of the energy situation. Power generation accounts for 2% or so of petroleum use in the US, mostly in remote places and in applications such as mobile generators. Petroleum in the US is mostly used to make vehicle fuels. Vehicles are the problem.
Mr. Callahan,
The sour crude problem is a short-term one. In the US it is perpetuated by refinery licensing obstacles and other regulatory annoyances. This is not true in the rest of the world. Give it a year or two.
Mr. Kervick,
You are completely correct. Why is it that people complain when the President actually is practicing diplomacy, when they spend so much of their time complaining that he doesn't ?
Posted by: luisalegria | Apr 26, 2005 2:42:38 PM
This is NOT a crisis. Its a squeeze. No need to open up those reserves unless we reach an actual crisis.
Not to nitpick--Reid's oil proposal is straightforward pandering--but it's not about diverting oil from the reserve. It's a question of whether or not to keep adding to the SPR, topping it up from 98% capacity to 100% and raising pump prices by a nickle a gallon.
Posted by: Max | Apr 26, 2005 2:42:57 PM
Yes, always best to outsource the vaguely homophobic remarks to others. (OTOH, I think that Logan's remark that Saudi should adapt to our customs while he is here may be wrong - Bush was host and the Saudi his guest; I thought you are supposed to make the guest feel at home. Anyway.)
However, I object to Matthew's remark: "fundamentally it's something we need to start dealing with, rather than whining about". Maybe I'm misreading it, but aren't the Democrats supposed to be IN FAVOR OF high gas prices? You know, discourage greenhouse gasses, etc? How are we ever going to reduce petroleum usage if BOTH parties are pandering by promoting lower prices? After all, lower prices means more consumption. We want HIGHER prices, no?
Posted by: Al | Apr 26, 2005 2:43:45 PM
Not quite correct. We want lower prices and higher taxes. I want consumers to see high prices at the pump so that they're encouraged fo make more sensible driving choices, but I'd rather see that money going to Washington than to Riyadh.
Posted by: Matt Austern | Apr 26, 2005 2:49:48 PM
If it were obvious that oil prices would be higher in the future (discounting for inflation and interest) than they would be at that higher price now as there would be huge gains available to all who possessed this obvious knowledge. Now, maybe you are making the case that the consensus view of investors/energy analysts with all of their focus and resources applied to this question is wrong and that you have some unique insights which allow you to predict the coming boom in oil prices. If so, I would expect that you are leveraged to your eyeballs in acting upon this belief. If not, why not?
Posted by: quietstorm | Apr 26, 2005 2:53:16 PM
actually, luis, one of the reasons I think the Saudis brought up the refinery issue is that they're now sending over hevier crude.
Posted by: praktike | Apr 26, 2005 2:55:51 PM
I'm in favor of gas prices which rise predictably, over many years. This would give business and consumers time to make capital investments that reduce oil demand. (We're going to hit supply problems by 2030 at the latest, and that's assuming you believe OPEC's inflated reserve numbers. Hint: OPEC members have a huge incentive to lie.)
I'm *not* in favor of a summer superspike, which could happen if somebody bombs a major refinery. Nasty, nasty, nasty.
Posted by: Eric | Apr 26, 2005 2:56:36 PM
The sour crude problem is a short-term one. In the US it is perpetuated by refinery licensing obstacles and other regulatory annoyances. This is not true in the rest of the world. Give it a year or two.
I find it hard to believe that refineries will be able to make significant changes in a year or two even if regulary "obstacles" disappear overnight. From the same article, it sounds as if there is already a glut of sour, Saudi or not, so there would already have been incentives for them to switch.
I'm also not convinced that refiners have much incentive to invest in new infrastructure in any case, when consumers are willing to keep paying at the pump. I don't want to make this too simplistic. You could increase your margins by processing less expensive crude, but you're exposing yourself to the risk of a price collapse on higher quality crude, which would make your new capacity a lot less of an advantage. The conservative strategy seems to be to raise prices and let the consumer pay. From the standpoint of a refiner, there is no problem to be solved. Things have never been better.
Posted by: Paul Callahan | Apr 26, 2005 2:58:14 PM
I think it makes complete and total sense to open the SPR to deal with temporary spikes in the market - e.g. supply disruptions due to war. Under such a set of circumstances, I can't see a reason not to open up the tap to ease prices, then refill the Reserve when oil is cheap again.
But no one should think that's what's happening now.
World demand is surging; according to a graphic in the Tampa Tribune on 4/17, first-quarter world oil consumption was 84.7 million bpd, which is running real close to max world production capacity. Prices aren't going to go back down in a major way anytime soon; it would take substantial conservation efforts both by us and the Chinese to reduce demand enough to make that happen. And it won't.
So it's time for the U.S. government to lead the way in making sure America is ready to adapt to a world of scarce, expensive oil. And under any previous Administration, I'd have a fair expectation of that happening - even under Reagan or Bush Sr.
But not with these guys. They're ready to take care of 'problems' like Iraq and Social Security that don't really need solutions in any hurry, but in areas where there's a real crisis - be it the string of budget deficits, the precarious dollar, the approach of peak oil, the possibility of an avian flu epidemic, the state of U.S. health care and health care funding - there's nobody minding the store.
Why? Because this Administration is about looting and pillaging this country on behalf of our economic elites. And dealing with real problems might interfere with that.
Posted by: RT | Apr 26, 2005 2:59:11 PM
Mr. Callahan,
Crude Oil is a pretty fungible commodity. If a refiner, anywhere in the world, is willing to handle a different grade given a price advantage he will. And a lot of countries are cheaper and quicker about making such infrastructure changes.
Also, US refiners have been upgrading refineries to handle more sour crude for several years now. All the majors are currently doing something in that area, to my knowledge. That process is on-going.
Posted by: luisalegria | Apr 26, 2005 3:52:10 PM
Yes, always best to outsource the vaguely homophobic remarks to others.
It's not homophobic to wish that we lived in a world where the president could be more open about his bisexuality.
Posted by: Violet Slandre | Apr 26, 2005 3:53:43 PM
MY wrote: "If we stopped relying on oil for electricity generation, that, too, would improve the situation."
Oil accounted for exactly 3% of electric power generation in the US in 2004. 50% of our power comes from coal, and the bulk of the remainder is hydro, nuke, or natural gas.
That 3% of petroleum usage for electric power mostly stems from diesel generators that are used as emergency backup power at hospitals and factories (they actually got used a lot in Florida last summer), and a practice called "peak shaving" in which a diesel generator runs for an hour or two a day to reduce a facility's peak demand on the grid. There is a list of reasons why these applications make a lot of sense. I would not advocate reducing it.
It's better to focus on higher-mileage cars, and less driving altogether.
Posted by: Joel | Apr 26, 2005 4:13:18 PM
Clue, dudes. The 70s oil price spike was a supply problem, mostly because of an embargo and cartel.
Of course the price plummeted when OPEC saw that economies, and new supplies.
Our current prices are due to demand, and are unlikely to go down. If anyone knows of a cite that believes we can increase supply even 10%, ever, any source, let me know. Now prices might decline due to macroeconomic reasons, like recessions, but I don't think even conservation will ever lower the price of oil again.
China could easily increase their imports by several 100 percent in the next decades, and still not meet their growth and development goals. There is scarcely any limit to the oil the developing countries actually want, the only question is how much they can afford.
Posted by: bob mcmanus | Apr 26, 2005 4:15:51 PM
And hey, if it wasn't about oil, and it wasn't, what was this big deal meeting about?
Posted by: bob mcmanus | Apr 26, 2005 4:28:36 PM
> And hey, if it wasn't about oil, and it wasn't,
> what was this big deal meeting about?
They can't slip GannonGuckert into the White House undetected anymore.
Cranky
Posted by: Cranky Observer | Apr 26, 2005 4:29:52 PM
Al (and I assume it's the real Al because he makes an intelligent point) writes:
Maybe I'm misreading it, but aren't the Democrats supposed to be IN FAVOR OF high gas prices? You know, discourage greenhouse gasses, etc? How are we ever going to reduce petroleum usage if BOTH parties are pandering by promoting lower prices? After all, lower prices means more consumption. We want HIGHER prices, no?
I can't speak for all Democrats, but here's my (tentative) take:
-Unless we find a major new oil reserve soon (ANWR obviously won't cut it), oil prices are going to keep rising as China and India increase their demand. These countries have populations totaling half the world. The Saudis ain't gonna be able to increase output to match demand.
-Democrats don't WANT high oil prices any more than a kid who eats lots of candy WANTS cavities. I'd rather plunge R&D money into alternatives (and gives companies incentive to produce more efficient fuels/modes of transportation) than slap Americans with a gas tax.
-Since increased oil prices are inevitible (in the long run if not the short run), the United States should be plowing lots of money for research and development into alternative fuels. Everything should be on the table, including nuclear power (I know, it's liberal heresy, but as a temporary solution I don't see how much harm it could do... France uses it after all ;-) See Mark Kleiman for a more knowledgeable version of this argument.)
Posted by: Brad R. | Apr 26, 2005 4:31:05 PM
"the whole spectacle of an American President begging the Saudi monarchs to lower oil prices is bizarre and repugnant"
That's precisely what Reagan did to undermine Soviet foreign income. It seemed to work quite nicely, actually.
Posted by: am | Apr 26, 2005 4:42:08 PM
That's precisely what Reagan did to undermine Soviet foreign income. It seemed to work quite nicely, actually.
yeah, just look at how badly they're hurting now.
Posted by: cleek | Apr 26, 2005 9:10:16 PM
errr... Saudis, not USSR... errr. nevermind :)
Posted by: cleek | Apr 26, 2005 9:10:55 PM
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