[R-G] [BillTottenWeblog] Majesty, We Have Gone Mad

[Bill Totten]

An open letter to King Abdullah of Saudi Arabia

by George Monbiot

Published in the Guardian (May 26 2008)


Your Majesty,

In common with the leaders of most western nations, our prime minister
is urging you to increase your production of oil. I am writing to ask
you to ignore him. Like the other leaders he is delusional, and is no
longer competent to make his own decisions.

You and I know that there are several reasons for the high price of oil.
Low prices at the beginning of this decade discouraged oil companies
from investing in future capacity. There is a global shortage of skilled
labour, steel and equipment {1}. The weak dollar means that the price of
oil is higher than it would have been if denominated in another
currency. While your government says that financial speculation is an
important factor, the Bank of England says it is not {2}, so I don't
know what to believe. The major oil producers have also become major
consumers; in some cases their exports are falling even as their
production has risen, because they are consuming more of their own
output {3}.

But what you know and I do not is the extent to which the price of oil
might reflect an absolute shortage of global reserves. You and your
advisers are perhaps the only people who know the answer to this
question. Your published reserves are, of course, a political artefact
unconnected to geological reality. The production quotas assigned to its
members by Opec, the oil exporters' cartel, reflect the size of their
stated reserves, which means that you have an incentive to exaggerate
them. How else could we explain the fact that, despite two decades of
furious pumping, your kingdom posts the same reserves as it did in 1988? {4}

You say that you are saving your oil for the benefit of future
generations {5}. If this is true, it is a rational economic decision:
oil in the ground looks like a better investment than money in the bank.
But, reluctant as I am to question your majesty's word, I must remind
you that some oil analysts are now wondering whether this prudence is a
convenient fiction {6}. Are you restricting supply because you want to
conserve stocks and keep the price high, or are you unable to raise
production because your fabled spare capacity does not in fact exist?

I do not expect an answer to this question. I know that the true state
of your reserves is a secret so closely guarded that oil analysts now
resort to using spy satellites to try to estimate the speed of
subsidence of the ground above your oil fields {7}, as they have no
other means of guessing how fast your reserves are running down.

What I know and you may not is that the high price of oil is currently
the only factor implementing British government policy. The government
claims that it is seeking to reduce carbon dioxide emissions, by
encouraging people to use less fossil fuel. Now, for the first time in
years, its wish has come true: people are driving and flying less. The
AA reports that about a fifth of drivers are now buying less fuel {8}. A
new study by the Worldwide Fund for Nature shows that businesses are
encouraging their executives to use video conferences instead of flying
{9}. One of the most fuel-intensive industries of all, business-only air
travel, has collapsed altogether {10}.

In other words, your restrictions on supply - voluntary or otherwise -
are helping the government to meet its carbon targets. So how does it
respond? By angrily demanding that you remove them so that we can keep
driving and flying as much as we did before. Last week Gordon Brown
averred that it's "a scandal that forty per cent of the oil is
controlled by Opec, that their decisions can restrict the supply of oil
to the rest of the world, and that at a time when oil is desperately
needed, and supply needs to expand, that Opec can withhold supply from
the market" {11}. In the United States, legislators have gone further:
the House of Representatives has voted to a bring a lawsuit against
Opec's member states{12}, and Democratic senators are trying to block
arms sales to your kingdom unless you raise production {13}.

This illustrates one of our leaders' delusions. They claim to wish to
restrict the demand for fossil fuels, in order to address both climate
change and energy security. At the same time, to quote Britain's
department for business, they seek to "maximise economic recovery" from
their remaining oil, gas and coal reserves {14}. They persist in
believing that both policies can be pursued at once, apparently unaware
that if fossil fuels are extracted they will be burnt, however much they
claim to wish to reduce consumption. The only states which appear to be
imposing restrictions on the supply of fuel are the members of OPEC,
about which Gordon Brown so bitterly complains. Your majesty, we have
gone mad, and you alone can cure our affliction, by keeping your taps shut.

Our leaders, though they do not possess the faintest idea of whether or
not the oil supplies required to support it will be sustained, are also
overseeing a rapid expansion of our transport infrastructure. In the
United Kingdom we are building or upgrading thousands of miles of new
roads and doubling the capacity of our airports, in the expectation that
there will be no restriction in the supply of fuel. The government's
central forecast for the long-term price of oil is just $70 a barrel {15}.

Over the past few months I have been trying to discover how the
government derives this optimistic view. In response to a parliamentary
question, it reveals that its projection is based on "the assessment
made by the International Energy Agency (IEA) in its 2007 World Energy
Outlook" {16}. Well last week the Wall Street Journal revealed that the
IEA "is preparing a sharp downward revision of its oil-supply forecast".
Its final report won't be released until November, but it has already
concluded that "future crude supplies could be far tighter than
previously thought". {17} Its previous estimates of global production
were wrong for one simple and shocking reason: it had based them on
anticipated demand, rather than anticipated supply {18}. It resolved the
question of supply by assuming that it would automatically rise to meet
demand, as if it were subject to no inherent restraints.

Our government must have known this, but it has refused to conduct its
own analysis of global oil reserves. Uniquely among possible threats to
the economy and national security, it has commissioned no research of
any kind into this question {19}. So earlier this year I asked the
department for business what contingency plans it possesses to meet the
eventuality that the IEA's estimates could be wrong, and that global
supplies of petroleum might peak in the near future. "The Government",
it replied, "does not feel the need to hold contingency plans" {20}. I
am sure I do not need to explain the implications, if its forecasts turn
out to be wildly wrong.

Your majesty, I recognise that this is not among your usual duties as
the ruler of Saudi Arabia. But I respectfully beg you to save us from
ourselves.

Yours Sincerely,

George Monbiot

www.monbiot.com

References:

1. Carola Hoyos, 19th May 2008. Running on empty? Fears over oil supply
move into the mainstream. Financial Times.

2. Ambrose Evans-Pritchard, 22nd May 2008. Why oil could soon come
barrelling down. The Daily Telegraph.

3. Jeff Rubin and Peter Buchanan, 10th September 2007. OPEC's Growing
Call on Itself. Occasional Report # 62. CIBC World Markets.
http://research.cibcwm.com/economic_public/download/occrept62.pdf

4. For example, Danny Fortson, 4th January 2008. Oil: the power to
shock. The Independent.

5. Carola Hoyos, ibid.

6. For example, Ambrose Evans-Pritchard, 16th May 2008. Day of truth for
US- Saudi axis. The Daily Telegraph.

7. Carola Hoyos, ibid.

8. BBC Online, 19th May 2008. Fuel prices 'keep cars off road'.
http://news.bbc.co.uk/1/hi/business/7409166.stm

9. WWF, 2008. Travelling Light: why the UK's biggest companies are
seeking alternatives to flying.
http://www.wwf.org.uk/filelibrary/pdf/travelling_light.pdf

10. For example, Kevin Done, 23rd May 2008. Silverjet suspends shares
amid funding crisis. Financial Times.

11. Gordon Brown, 19th May 2008. Speech to Google Zeitgeist Conference.
http://www.number-10.gov.uk/output/Page15587.asp

12. Suzy Jagger, 21st May 2008. Congress takes step towards Opec legal
challenge. The Times.

13. Ian Black, 17th May 2008. Frustration for Bush as pledge to Saudis
fails to win oil concession. The Guardian.

14. Eg, Department of Trade and Industry, May 2007. Meeting the Energy
Challenge: a white paper on energy. Paragraph 4.07, page 107.

15. Dan Milmo, 20th May 2008. Road policy oil assumptions attacked. The
Guardian.

16. Malcolm Wicks, 2nd April 2008. Parliamentary Answer to question 197009.
http://www.publications.parliament.uk/pa/cm200708/cmhansrd/cm080402/text/80402w0045.htm

17. Neil King Jr and Peter Fritsch, 22nd May 2008. Energy Watchdog Warns
of Oil-Production Crunch. Wall Street Journal.

18. ibid.

19. I have asked the four departments with direct interests in future
oil supply: DBERR, transport, environment, communities and local government.

20. DBERR, 8th April 2008. Response to FoI request Ref 08/0091.


Copyright (c) 2006 Monbiot.com

http://www.monbiot.com/archives/2008/05/27/majesty-we-have-gone-mad/


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