More demand for oil in Mideast hikes prices

Mideast oil producers increasingly consume their own oil to fuel their fast-growing economies, driving up oil prices.

WASHINGTON –
Middle Eastern oil-producing nations are behind today’s record high oil prices, but not for the reason you might think. Taken together, oil-rich nations represent a bloc of fast-growing economies that are now sucking up new energy supplies almost as fast as they’re coming to market.

Together, the six nations that make up the Gulf Cooperation Council (GCC) are now consuming about as much oil as China, whose thirst for oil frequently gets the blame for tight global supplies.

These GCC countries — Saudi Arabia, Kuwait, Oman, Qatar, Bahrain and the United Arab Emirates — have grown at a 7 percent annual clip since 2002. They boast a per-citizen income — $19,000 — that is three times China’s. Demand for oil in the Middle East has risen by almost 6 percent annually since 2004.

Here’s what that means for Americans: The Bush administration has leaned on the Saudi Arabian monarchy to step up oil production, but much of the output will stay in the Persian Gulf region to power newly dynamic economies. That means global demand for oil will continue to strain supply. Oil prices are likely to stay high.

…Middle East oil exporters are increasingly recycling their petrodollars into their own economies. The value of the U.S. debt and securities held by Mideast oil-exporting nations stood at about $125 billion in June 2007, according to the Treasury Department. That’s just a bit more than the $121 billion in U.S. financial investments they held in June 2004, when the run-up in oil prices began. They used to invest their profits largely here. Now they’re keeping them home.

”It starts to create unbelievably really serious demand. And then every time you jump 1 million barrels per day of energy demand in the Middle East, your supply [for export] falls by 1 million barrels per day,” said Matthew Simmons, an investment banker specializing in oil.

Miami Herald