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Put a Tyrant in Your Tank
Joshua Kurlantzick, Mother Jones
You thought ExxonMobil was bad? Meet the new kings of crude.
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… Groveling may not come naturally to guys like [Shell CEO] van der Veer, but they’d best get used to it. Soaring oil prices have emboldened Russia and other petrostates to stand up to Western execs and build up their own state-run petroleum operations. While some oil multinationals continue to haul in record profits, they’re rapidly losing global clout, and with their holdings on the decline, executives have little choice but to grin and bear it. We’re “seeing a further shifting in the oil industry in which national oil companies are the power brokers,” says Andrew Neff, senior energy analyst at economic forecaster Global Insight.
Anyone inclined to celebrate Big Oil’s recent misfortunes had better hold off on the champagne. For however badly the Western firms may have behaved, the new global oil barons could one day leave environmental and social activists nostalgic for the bad old days of ExxonMobil.
A decade ago, Western petroleum companies still ruled the world. To entice these firms to develop their oil resources, cash-strapped exporters such as Venezuela and Russia gave away the store. Fairly typical was the original Sakhalin-2 agreement, which let Shell recoup all the money it had put in before Russia earned a dime in oil revenues, and generous incentives from Caracas lured some 60 firms to Venezuela’s oil sector during the 1990s.
Funny how a sevenfold price increase changes the game.
(May/June 2008 Issue)
Strange to read a jingoistic article like this in Mother Jones, normally a liberal-left publication.
Many related articles in this issue of Mother Jones. The editors say they will be putting all articles in this issue online as a public service over the next several weeks. -BA
‘King Faisal Stood Firm on Oil Embargo’
Badr Alkhorayef, Arab News
The United States threatened to use force against Saudi Arabia in 1973 after King Faisal, along with other Arab leaders, imposed an oil embargo on countries that supported Israel during the October War, Prince Turki Al-Faisal, former intelligence chief and ambassador to Washington, said in an interview with Asharq Al-Awsat yesterday.
In the interview, that appeared ahead of a scientific seminar on King Faisal to be opened by Riyadh Gov. Prince Salman on Tuesday, Prince Turki shed light on important events that took place during his father’s rule.
Prince Turki, who was an adviser at the Royal Court in 1973 when King Faisal took the oil-embargo decision, said the king was not shaken by the US threat and stood firm.
He added that the oil embargo was instrumental in encouraging the US to find a quick and just solution to the Arab-Israeli conflict. “King Faisal and other Arab leaders were forced to take the decision as a result of America’s unprecedented support for Israel during the war,” the prince said.
He added that American officials talked about the possibility of attacking Saudi oil fields, something that was leaked in US newspapers. Some of these statements came from the then US State Secretary Henry Kissinger.
(4 May 2008)
Suing OPEC
The Economist
What’s the next dumb economic idea in this race?
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THE race for the White House has been a depressing experience for anyone foolish enough to have hoped for a rational debate about economic policy. … The topic that best showcases the candidates’ appalling economic cluelessness is the surge in oil prices.
… Mrs Clinton’s other policy solution is more logical, though completely impractical. One reason the oil price is so high is the existence of a cartel run by the Organisation of Petroleum Exporting Countries (OPEC). Unfortunately, breaking up that cartel is easier said than done.
Mrs Clinton, in a rare moment of enthusiasm for the institutions governing the global trading system, suggests action by the World Trade Organisation. But it has jurisdiction over only a handful of OPEC members, and has so far given no indication that it can impose antitrust rules on what is, after all, a cartel made up of sovereign governments.
Over the years, various attempts to sue OPEC have been made under American antitrust law. In 2007, even Congress voted to sue OPEC for engaging in a “price fixing conspiracy” that has “unfairly driven up the price” of crude oil and, in turn gasoline.
This lawsuit would also have removed sovereign immunity that protects the governments in OPEC from prosecution or having their assets seized as punishment. The trouble is, even if OPEC were found guilty of antitrust abuses in an American court, how would the cartel actually be punished or broken up?
Ultimately, there is no way to secure compliance with America’s courts short of military action, which is one reason why even the Bush administration opposed last year’s Congressional vote. But, if oil prices continue to rise and the election race remains close, how long before one of the presidential candidates proposes bombing OPEC, even though there could be no surer way to send oil prices soaring to new highs?
(6 May 2008)
Original headline: “Bomb OPEC” — not the most diplomatic of headlines, even if meant facetiously. -BA
