With fevered attempts to keep the price of oil falling further by cutting their production targets some 1.2 million barrels a day and threatening further cuts during their scheduled December meeting, OPEC is desperately trying to keep prices above $60 a barrel. And yet, surprisingly (see post "What's Up?? OPEC Agrees to Production Cuts Yet Prices are Down" 10.23.06) after the announced cuts last week, prices continued to erode.
A temporary blip occurred on Wednesday when storage levels for crude oil showed a surprisingly large draw down resulting in a knee jerk pop in prices. Upon the realization that the drawdown was more due to temporary technical difficulties in offloading tankers at Gulf coast ports rather than heightened
consumption, prices began to erode once more.
But then, as if on cue early in the trading day on Friday, as oil prices were beginning to slip under $60/bbl once more, a Reuters news flash hit the wires that U.K. forces were being sent to Saudi Arabia's Ras Tanura oil terminal. Ras Tanura has a loading capacity of six million barrels a day, the largest offshore loading facility in the world. The U.S. Naval Forces Central Command in Bahrain advised that coalition naval forces were taking "prudent, precautionary measures" whereas the U.S. Central Command in Florida cited "recent threats to oil infrastructure".
As the story hit the wires the price of oil immediately spiked back over $60/bbl!
Given their previous pronouncements the source of the threats was in likelihood those of Al Qaeda who have repeatedly threatened to attack the oil shipping and producing infrastructure. But the timing of this threat raises some curious questions.
Was it a "fortuitous" coincidence that Al Queda seemed to be helping OPEC play on the consuming world's supply anxieties and helping OPEC exact a propitiously timed fear premium? Perhaps. Remember in the recent round of OPEC negotiations Saudi Arabia had taken the lead in cutting production in order to ratchet up prices. Though purportedly declared enemies, individual Saudi ties to Al Qaeda run deep. Could there be a unanimity of interest? The higher the price of oil, the more money is available to fund Wahabbi clerics, Wahabbi mosques and social centers and Madrassas' all feeding into the culture of Al Qaeda and Muslim radicalism.
Far fetched? Perhaps. But given the nature of the dangers at hand, perhaps the
time for linear thinking is passed.
Oh, and one last thing. While Saudi Arabia and OPEC gainfully plot to manipulate the price of oil to extortionary levels it is not the Saudi navy that is seriously protecting Saudi ports but rather those of the coalition forces, read U.K and the United States. In doing so they permit Saudi Arabia and their OPEC cohorts to safely and blatantly jump prices and thumb their noses at American and world consumers.
All this is being done at enormous cost to U.S. taxpayers. According to Amy Myers Jaffe, an analyst at the James A. Baker Institute for Public Policy at Rice University, it is estimated that the U.S. military alone was spending some $80 million a day to guard OPEC against terrorist attack.
Remember the gouging starts at the well, well before it reaches the gasoline pump.