US tells Saudis to stabilise oil market

  • From: "Muslim News" <editor_@xxxxxxxxxxxxxxx>
  • To: <submit@xxxxxxxxxxxxxxx>
  • Date: Sat, 13 Apr 2002 10:18:24 +0100

COLIN POWELL finally meets the Israeli Government today, but the most
fruitful meeting of his trip has probably already happened: his dinner
in Casablanca on Monday with Saudi Arabia's Crown Prince Abdullah. In
talks perfected in years of US-Saudi diplomacy, the Secretary of State
asked for, and got, reassurances that the kingdom would stabilise the
oil price during the current turmoil. 

That promise was made after Iraq suspended supplies but before the
strikes at Venezuela's monopoly oil exporter - potentially more
disruptive to the US in the short term. Still, the markets have assumed
the promise will hold good; few are predicting a further jump in the oil
price after a 60 per cent rise in the past year. 

Crucially for American politics, the heat is coming off petrol prices. 

But Americans may be taking it too calmly. Attempts to reshape US energy
policy are dying amid bitter fighting between the White House and the
Democrat-controlled Senate. Gratefully receiving this week's reassurance
about this summer, the US is ducking the chance to cope with threats to
supplies that are all too imaginable in the longer term. 

Of course, as far as the next few months go, this week has restored a
fair share of confidence amid the turmoil. All those "wasted" trips by
Powell and Vice-President Dick Cheney were not wasted, it seems. Opec is
being at least halfway obliging to the US. As well as the Saudi remarks
on Tuesday, Opec has said that Iran and Libya will not join Iraq's
month-long embargo in protest at Israel's attack on Palestinians. 

There is one cautionary note. Opec said that it has no plans to replace
the two million barrels a day lost from Iraq, or the 1.5 million from
Venezuela (a figure drawn from industry estimates, although the
Government denies a shortfall). But that is based on a calculation that
may well be right: that Opec reckons the the price rise will disappear
once the fighting in the Middle East cools. 

In a statement intended to be reassuring to the markets, it has said
that it sees no need for intervention before its next scheduled meeting
on June 26. 

That sanguine view has made its way through to American oil analysts. 

The price of petrol, that eternal determinant of national happiness, has
already surged by 25 cents in the last month, to $1.41, but is still
nearly 10 cents less than the level last year. 

Many analysts - in a message proving very popular across the country -
think it will not rise above $1.56 a gallon this summer. 

That may explain why the Iraqi and Venezuelan turmoil has had no
discernible impact whatsoever on American energy policy. The Bush
Administration has tried vainly to use the threat to promote its plan
for more drilling within the US. But the Senate has given it a cold
rejection. Last year the Bush Administration proposed a Bill to step up
national production, including drilling in the Alaskan National Wildlife
Refuge. Its version of the Bill also rejected plans, of which Democrats
were fond, to force cars to be more efficient; they would be smaller and
therefore "unsafe", it said. 

The Bill passed the House of Representatives, but is stalled in the
Senate. Democratic senators are enraged by promotion of drilling in the
Alaskan wilderness and the lost chance, as they see it, to promote
energy efficiency. At the vote next week, many expect it to be killed. 

In the immediate future, inaction probably reflects an accurate
appraisal of the risks. But the US has no plan to cope with profound,
permanent disruption of its supplies from the Middle East. 

At least in Venezuela, if the turmoil unseats President Chavez, the US
can assume that any successor would keep the oil pumping. For years, it
made that assumption, if nervously, about an overthrow of the Saudi
Royal Family. After September 11, against a backdrop of suicidal
terrorism, that is clearly unwise. 

The encouraging news this week, from the US's point of view, is that the
markets can accommodate an enormous amount of disruption from two of the
largest producers. But the Middle East is not about to become a model of
political stability. To judge by the immobility of American politics
this week, it may take the national trauma of a $2-plus gallon before it
focuses properly on the threat. 

Source:  The Times

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