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Saudi Industrial Drive Strains Oil-Export Role

Neil King Jr., Wall Street Journal
Long the biggest spigot for crude oil, Saudi Arabia now has broader ambitions. It wants to become a big exporter of chemicals, aluminum and plastic, and in the process to create jobs.

So Saudi Arabia is on a building binge. In the works are new seaports, an extended railroad system, a series of new industrial cities and a score of refineries, power stations and smelters. Over the next dozen years, such Saudi investments are expected to consume $600 billion.

But they’ll also consume something else: large quantities of Saudi oil — oil that otherwise could help slake other countries’ growing thirst.

Much as China leveraged its asset of cheap labor to make an industrial leap, the Saudis and their oil-rich neighbors are tapping their own prime asset to fuel development. “The region is looking to the future by turning to industries that rely on oil, a lot of oil,” says John Sfakianakis, chief economist at Saudi investment bank SABB, an affiliate of HSBC. “That means more oil stays here.”

The problem is that with output slumping in places like the North Sea and Mexico, the world is counting on increased oil supplies from the Middle East, and above all from Saudi Arabia. Global oil demand, now just over 85 million barrels a day, is expected to exceed 100 million barrels a day within 10 years. So the question arises: Can the kingdom continue to satisfy the world’s growing oil needs at the same time as its own economic engine demands ever more crude?
(12 December 2007)
Full text is available online at Zawya.

Oil-rich nations use more energy, cutting exports

Clifford Krauss, NY Times
The economies of many big oil-exporting countries are growing so fast that their need for energy within their borders is crimping how much they can sell abroad, adding new strains to the global oil market.

Experts say the sharp growth, if it continues, means several of the world’s most important suppliers may need to start importing oil within a decade to power all the new cars, houses and businesses they are buying and creating with their oil wealth.

Indonesia has already made this flip. By some projections, the same thing could happen within five years to Mexico, the No. 2 source of foreign oil for the United States, and soon after that to Iran, the world’s fourth-largest exporter. In some cases, the governments of these countries subsidize gasoline heavily for their citizens, selling it for as little as 7 cents a gallon, a practice that industry experts say fosters wasteful habits.

“It is a very serious threat that a lot of major exporters that we count on today for international oil supply are no longer going to be net exporters any more in 5 to 10 years,” said Amy Myers Jaffe, an oil analyst at Rice University.

Rising internal demand may offset 40 percent of the increase in Saudi oil production between now and 2010, while more than half the projected decline in Iranian exports will be caused by internal consumption, said a recent report by CIBC World Markets.
(8 December 2007)
Also at Tehran Times and International Herald Tribune.

Volatile mixture of factors lights a fire under crude price

Javier Blas and Chris Flood, Finanacial Times
The weak dollar and a mammoth flow of speculators deserting the credit market and jumping into commodities have become common explanations for the surge in oil prices towards $100 a barrel.

However, the behaviour of other commodities, in particular the price declines in base metals such as copper and aluminium, suggest that factors particular to the oil market, such as supply, demand and inventories, are playing a major role in driving prices higher.

After all, markets in general are clearly worried about the outlook for US economic growth, which would in normal circumstances be expected to depress demand for oil and send prices lower.

The latest leg of the oil rally started after the reduction in the US discount interest rate in August. Since then, West Texas Intermediate crude oil prices have risen by almost 40 per cent, while the S&P GSCI industrial metals index has only risen by 1.7 per cent.

Analysts say a combination of financial factors, including trading in options, on top of supportive fundamentals, are propelling inflation-adjusted oil prices to levels not seen since the second oil crisis in 1979-80.
(22 November 2007)

Saudi says no need to cut oil use to fight warming

Emma Graham-Harrison, Reuters
Top oil exporter Saudi Arabia said on Wednesday the world does not need to shift away from fossil fuels to combat global warming, suggesting pilot technology and greater efficiency as better options.

Oil Minister Ali al-Naimi told U.N.-led climate talks that the world should focus on research to cut emissions while continuing to use its “huge reserves” of crude, gas and coal.

Riyadh is traditionally wary of anything that might undermine demand for the vast reserves of oil that have transformed it from a small desert kingdom to a powerful international player, and is currently earning near-record prices for its crude.
(12 December 2007)