Saturday, February 25, 2006

Saudi Arabia, Al Qaida and Oil

Al-Qaida Threatens to Hit More Saudi Sites - Yahoo! News

MANAMA, Bahrain - Al-Qaida suicide bombers will attack more Saudi oil facilities, the terror group purportedly threatened Saturday in an Internet statement that claimed responsibility for the foiled attack on the Abiqaiq plant in eastern Saudi Arabia.[snip]

Two suicide bombers tried to drive cars packed with explosives into Abiqaiq, the world's largest oil processing facility, on Friday afternoon, but security guards opened fire and the vehicles exploded outside the gates, killing the bombers and fatally wounding two guards.[snip]

Saudi Oil Minister Ali Naimi quickly said the attack "did not affect operations" and that exports continued to flow. But the blast made the price of crude oil jump by more than $2 a barrel on the world markets.

I highly suggest, if you drive an SUV you may want to look for a second, cheap car that gets better gas mileage. This, along with Iraq's impending civil war and the volatile Phillipine situation is going to have gas prices shooting through the roof even if the Saudis try to give reassurances that the oil flow will not be interrupted:

Naimi met U.S. Commerce Secretary Carlos Gutierrez in Riyadh on Saturday and assured him the kingdom would "ensure the flow of oil despite the terrorist threats,"[snip]

A statement appeared on a militant Web site saying that Friday's attack was "part of a series of operations that al-Qaida is carrying out against the crusaders and the Jews to stop their plundering of Muslim wealth." It was signed "al-Qaida in the Arab Peninsula" — the name of the Saudi branch of the terror network.

The statement did not acknowledge that the attack was foiled. In fact, it claimed that the two "heroic holy warriors" managed to enter Abiqaiq.

"There are more like them who are racing toward martyrdom and eager to fight the enemies of god, the Jews, the crusaders and their stooges, the renegade rulers" of Arab countries, the posting said.

"You will see things that will make you happy, god willing," concluded the statement.

Bin Laden has been threatening attacks against the US, the West in general and Saudi Arabia. What is interesting about this statement is that, as usual, it's directed at their followers more than at the US or Saudi Arabia. The end phrase "you will see things that will make you happy" has appeared in similar videos, audios and written statements preceeding major attacks, but the statements usually get released after the attacks. In otherwords, the followers had the message before we did and that last statement was intended to let them know about the impending attack on the oil refineries. A quick reminder from AP about the AQ/Saudi status:

Al-Qaida is led by the Saudi-born Osama bin Laden, who has long sought to replace the Saudi monarchy with an Islamic government, accusing the royal family of selling out to American "infidels." In late 2004, bin Laden released a video in which he called for attacks on oil facilities to hurt the West.

The posting said Friday's attack was dubbed "Operation Bin Laden Conquest."

This was Saudi Arabia's main refinery:

The huge Abqaiq facility processes about two-thirds of Saudi Arabia's oil for export, removing hydrogen sulfide and reducing the vapor to make the crude safe for shipping. It lies 25 miles inland from the Gulf coast.[snip]

Saudi Arabia holds over 260 billion barrels of proven oil reserves, a quarter of the world's total. It currently produce about 9.5 million barrels per day, or 11 percent of global consumption. Abqaiq processes at least 5 million barrels a day.

Some folks continue to talk about the US at war for oil. In some respects it's true however it is not necessarily the US that declared the war in the region for this reason. Zawahiri and bin Laden have made numerous statements in the past, including their 1998 declaration of war from the World Islamic Jihad Front, in which they accuse the "infidels" of "plundering Muslim wealth".

There is more to the implication of the word "infidels" than targeting US interests, though we are the world's largest consumer of oil. China and Saudi Arabia recently cut a new deal and according to the Washington Post, that makes China Saudi Arabia's number one buyer.

The Saudi kingdom's new largest customer is China.

"Saudi sales to the U.S. have fallen off the table," James Placke, a senior associate at Cambridge Energy Research Associates and former U.S. deputy assistant secretary of state for Near Eastern Affairs, said Thursday.

Saudi oil sales to the United States peaked in 2002 at 1.7 million barrels per day but had fallen to 1.1 million barrels per day in May, the last month for which U.S. Department of Energy figures are available, Placke said at a Washington forum.[snip]

"I think, while there was what has generally been described as a sufficient degree of cooperation between Saudi Arabia and the United States, (the invasion of Iraq) clearly was not in tune with Saudi Arabia or really anyone else in the Arab world for that matter," Placke said.

"I think what we're seeing is not punishment or retribution, but I think it's a slow recognition by the Saudi side that the 'special relationship' isn't so special anymore," he added.

The fact that we ignored their angst over Iraq also means that we may not view them as "special" anymore, though, it would be foolish to think that we would not be concerned over the status of Saudi Arabia. According to the Washington Post article, Canada and Mexico now vie for the number one position as supplier of oil to the US, though we are still relatively diversified, as are almost all countries, because oil is sold on the open market which means that it's bought as it is available from whom it is available from. Specific deals are largely made through corporations. It's the corporations that make decisions about where to get oil for refining into gas and other products. They make these decisions based on stability of the region, potential for interruption of product, cost of shipping, etc.

In the war on Islamist terrorists, this has certain implications, vaguely alluded to in the Post:

"The only consequence of this is I think a political consequence," Placke said. "This may color how the two parties look at each other as we go down the road."

But they still remain very important on the world oil market:

the details of Saudi oil sales are much less important than Saudi production capacity, which the country often uses to smooth jolts to world oil prices like the Sept. 11, 2001, terror attacks, the Iraq War or strikes in Venezuela.

"The Saudis have basically played the role of the central bank," Gause said. "We're at a point where there's precious little surplus capacity."

A large source of the reduction in the world's excess capacity has been China's burgeoning appetite for oil.

Placke said China recently surpassed Japan in its oil consumption and is currently the world's second-largest oil market behind the United States.

So, while we may shift our main sources from the Middle East to other nations, such as Canada and Mexico, as has been the call from many on the left and others who do not comprehend how the oil market works, the effect on the oil market remains the same: supply and demand = rising prices.

Thus, the US still sees the stability of Saudi Arabia and the longevity of its rulers strategically important to our long term survival. Further, this "supply and demand" of oil has precipitated at least one world war (WWII), though it is widely ignored in history books which favor more simplistic concepts of Nazi and Japanese empire without the underlying cause being mentioned. In fact, most people look at the rise of Nazi power in Germany to be precipitated by the severe reparations imposed after WWI. This is true to a point, but Nazi expansionism included attempts to gain control of major ports, shipping routes and specifically oil fields in the Balkans, Caucuses and the Middle East.

The Japanese were already heading towards war with the US over control of oil and shipping lanes.

This doesn't mean that world war for oil is imminent, but it does mean that every diplomatic, military and economic move in regards to oil producing and consuming countries has a serious effect that may not be seen for several decades. For instance, WWII and Japan again, US expansion into the Philipines and South East Asia at the end of the 19th century largely referred to as the "Banana Wars", along with the growing Japanese economy from newly opened trade with the west (precipitating it's growing military), was an important factor in the world war that began some forty years later.

The same could be said about Nazi Germany and the spread of Communism as well as British and French hegemony in the post WWI Middle East.

A comprehensive energy plan for the US has to include more than simply "disengaging" from the Middle East or diversifying our oil buying to other nations. It does need to include new innovative technologies that will help take some pressure off the supply and demand of oil. This problem is compounded by growing populations and even immigration which means that, not only do we need to replace existing oil consumption with some sort of technology, it has to be able to keep up with the expansion of the need from both expanding individual homes and businesses created through or expanded in the growing economy.

The President's recent tour and subsequent speeches regarding energy technology signal a renewed attention to this part of the long term plan.

Some technologies that are gaining attention or renewed attention:

Windmills, ethanol from corn and biodiesal fuel from soy beans.



And even dog poop.

Unfortunately, the US is currently a long way from being able to replace a significant part of it's oil consumption with any or all of these technologies so the US must be able to remain vigilant and continue to protect strategic interests around the globe as well as maintain the viability of our allies. Which means, whether we buy oil directly form the Middle East or not, "disengagement" is a catchy political slogan, but doesn't have anything to do with reality.

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