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Saturday, November 17, 2007

Saudi Arabia... Screw You Wall Street!


There is not one person that knows the oil business better than the folks in Saudi Arabia when it comes to supply and demand on the world oil market. Even Saudi Arabia is wondering how the world of oil market speculation has the price of a barrel of oil tempting at the hundred dollar mark. With that thought in mind the nation of Saudi Arabia is exploring for new oil fields with all of the new technology available to ramp up production thus saying to oil market speculators in the market, SCREW YOU!

Wall Street can play the game and pocket the cash but I’m thinking that the producers of oil in the world are looking at the bigger picture and alternative energy sources are more than attractive with oil at one hundred dollars a barrel. That is and will be a direct effect to the bottom line of all oil producing exporting countries, aka OPEC. Oil has only been the main source of heating and vehicle power because it was cheap and affordable to the masses. That is no longer the case.

Then again, I have to give the nation of Saudi Arabia credit for bumping up the supply to offset the non stop rumor mills on Wall Street that speculate that the oil supply to the world is limited thus driving the price up into Never Never land. Peter Pan and Tinker Bell have nothing to worry about as long as Wall Street believes in Fairies and an oil market with a supply problem. Over at the Washington Post they have this amazing post on this very subject…

Saudi Arabia Works the Vast Desert To Pump Out More High-Quality Oil

By Steven MufsonWashington Post Staff Writer
Saturday, November 17, 2007; Page D01


SHAYBAH, Saudi Arabia -- For a decade, Hussain al-Obaid has been working in the soft red dunes that stretch across the vast desert known as Rub al-Khali, or the Empty Quarter. In summer, temperatures climb as high as 130 degrees and sandstorm winds gust up to 80 mph, though on a mild fall evening the stars shine and the air is mild.

A graduate of the University of Oklahoma at Tulsa, Obaid is the engineering superintendent of a project that pumps half a million barrels of crude oil a day from beneath the sand and delivers it through a 400-mile pipeline. The oil is some of the world's purest, highest-quality crude, easily refined into gasoline.

To complete the project, construction crews built a road across the desert and moved 100 million cubic feet of sand to make way for an airplane runway.

Next year, Saudi Aramco, the state oil company, plans to boost production by 250,000 barrels a day, one step in an effort to expand the kingdom's oil-production capacity to 12.5 million barrels a day from the 11.3 million barrels. The new production is part of a strategy that could ease market tension and is designed to preserve Saudi Arabia's ability to produce 1.5 million to 2 million barrels a day more than its actual output in the face of rising world oil demand, said a senior Saudi Oil Ministry official who spoke on condition of anonymity.

"Tell me of any other country that's made commitments this broad on its own," Prince Abdulaziz bin Salman, the deputy minister of petroleum and natural resources, said during preparations for this weekend's summit of the Organization of the Petroleum Exporting Countries in Riyadh, the Saudi capital. "We are the only country with a policy of maintaining excess capacity."

Snip-sa-doozey

… it costs Saudi Arabia about $2 to produce a barrel of oil. Developing new fields is also cheap, he said, running about a quarter or less of exploration and development costs elsewhere.
- Washington Post

Unless the Washington Post is making things up… Did that say $2 cost to produce a barrel of oil? Where else in the world can you get a cost to market price mark up like that? This sort of thing only happens when the market is let loose to run wild and around the corner is the market crash. That is where the end of the line is because the bottom of this feeding frenzy is the consumer all around the world and when they can no longer afford the product they will not buy it.

Thus is the major investment in renewable energy like wind power, solar power and of course Ethanol or bio fuels. That is why Saudi Arabia is ramping up production. It is in fact to the better interest of the Kingdom for the price of their product to be affordable. Where President Bush sees a free market the Saudi’s see a market out of control that will eventually threaten the bottom line of their nation.

It does not take a rocket scientist to figure out the oil market is raping the market. What it takes to offset the overblown cost of oil is chemists and creative minds to invent alternatives to oil that will make that profit driven market as much as yesterdays news as whale oil is for lighting your home at night. That process has already begun.

Papamoka
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Anonymous Anonymous said...

Thanks, dude! That explains it.

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