Commodore, Royal Saudi Navy (Retired)
Last Wednesday, I attended a program (debate and an interview) on the falling oil prices aired by one of the world’s leading television networks from their studio in Washington.
The title of the show was “The Heat.” It was broadcast on CCTV America with Anand Naido as the host the show. There were two other guests and a correspondent. They were Yasser Hakim from Cairo, Keyu Jin, a professor at the London School of Economics and from Houston Carl Larry, an expert on the oil industry and a director for Frost and Sullivan, an oil and gas consulting company. Viewers thought the debate went well.
I have attended several such television programs particularly with this network. I never had any doubt about any question, I was asked in the past. This time around, however, it was different.
I was willing and ready to say “I don’t know” to every question being asked. Oil behavior is far different from reality. It just doesn’t make sense. In other words, it is something that you have to play by ear…. Oops, did I say play it by ear. These words sound familiar.
Now, could it be that former Saudi Oil Minister Ahmed Zaki Yamani was speaking on behalf of any oil producer when asked at an international conference what is the Saudi Arabia’s oil policy and he shocked everyone in the audience by saying that we play it by ear. In other words, never mind what oil and energy experts would say, oil prices are like feather in the wind, very unpredictable. I mean let us be frank and honest, does the fall in oil prices from $140 per barrel to around $30 a barrel in just a few years make any sense?
To cut a long story short, oil price at this stage is going against any normal speculation, informed economic analysis and against every energy expert’s calculation. There are questions being asked in the West and there are questions being asked in the East.
As for people in the East, the big question is why the United States is allowing the sale of oil outside the US at a time when the cost of production exceeds the price of selling. Is it to give the American companies especially the small ones a space to breath by giving them the green light to sell what oil they found and they need to sell it? As we hear from American energy experts the American market is very saturated and if they don’t allow the sale of newly produced oil, then, many American companies would go bankrupt. Let us be straight and ask why the US didn’t allow their small and major oil companies to sell oil outside the US when the price of oil was above the $100-mark. And what is the real story behind the Shale Oil and is the world having sufficient reserves that can drive the price of oil from above $100 per barrel to below the $30 mark?
In the past few months we have heard and read all analysis about the drastic decrease in the prices of oil. And one of them was that it was Saudi Arabia behind it and it was meant to hurt countries like Russia and Iran. This analysis about Saudi Arabia’s oil policy became the lifeline for any expert who did not have an answer to why the prices were falling at such a rate. Many of them don’t know that Saudi Arabia is looking at its own interests and have no intention to cause any harm. As a matter of fact, there were many times during the past decades when Saudi Arabia took many strategic initiatives to help the world recover from economic recessions due to oil price drastic fluctuations. And it was Saudi Arabia that led OPEC to stabilize the world oil markets, which in turn have saved the economy of many countries.
Now, we all know that Saudi Arabia is very dependent on oil for the national budget and seems like that the oil business is Saudi business, but, may be the very low oil price at this stage is an opportunity for us to look at serious ways to diversify our sources of income. We have the means to do that. The bottom line is that no matter how high or low the price of oil is, we Saudis have no choice, but, to diversify our sources of income. Time doesn’t wait for any one.
Written by Abdulateef Al-Mulhim. Diversifying Sources of Income reprinted with permission of Arab News and Abdulateef Al-Mulhim.