The Peak Oil Crisis: A Meeting at Jiddah

If the only purpose of the meeting was to celebrate the Saudis opening the taps a bit at a new oil field in response to fears that their customers will soon be priced out of the market — that would be nice. However, it seems there will be more to the meeting than an increase in oil production. The White House is already suggesting that the proper way to solve the growing world oil shortage is for the OPEC countries to stop going it alone and let the big Western oil companies with all their technology, know-how, and investment capital back into the OPEC oil fields. The implication is that a few years with Exxon in charge of the best remaining oil fields and we will be back to $2 gasoline again.
Along with the “we might increase production” message were suggestions that the Saudis plan to make their own counter-demands at the meeting. There are indications the Saudis will propose that European governments cut back on the very high fuel taxes which run $4 to $5 a gallon, but which over the years have resulted in per capita oil consumption in Europe of roughly half that of the U.S. Large tax reductions would, in theory, reduce the economic pressure on European oil consumers which could in theory help stave off a pending recession which would be nice for the economies, but would probably increase the demand for oil. This tax-cut proposal clearly would not apply to the U.S. where fuel taxes are trivial in comparison with those in most European countries.

A second concern of the Middle Eastern oil producers is the growing cost and scarcity of food. With droughts, floods and the increasing cost of fertilizer cutting world food production, a number of countries are now limiting food exports. This is a major problem for the arid Middle East which must import food for its growing populations. Then there is the effort in many countries to increase production of food-based biofuels which is seen as driving up the cost of food to unaffordable levels for many. Several wealthy Middle Eastern oil states already have begun investing in agriculture projects abroad in an effort to insure a dedicated supply of food in the years ahead.

The overall message is that oil prices, food prices, water shortages, floods and droughts are all part of one big problem that Saudi oil production alone can’t fix.

Falls Church News Press