Open letter to Saudi king : Please keep oil supply low
Your Majesty, In common with the leaders of most western nations, prime minister Gordon Brown 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. 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, 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.
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.
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, with one motoring organisation reporting that about a fifth of drivers here are buying less fuel. A new study by the Worldwide Fund for Nature shows that businesses are encouraging their executives to use video conferences instead of flying. One of the most fuel-intensive industries of all, business-only air travel, has collapsed altogether.
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, Brown averred that it’s “a scandal that 40% 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”. In the US, legislators have gone further: the House of Representatives has voted to a bring a lawsuit against OPEC’s member states, and Democratic senators are trying to block arms sales to your kingdom unless you raise production.
Our leaders, though they do not possess the least idea of whether the oil supplies required to support it will be sustained, are also overseeing a rapid expansion of our transport infrastructure. In the UK, we are building or upgrading thousands of miles of 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 is just $70 a barrel.
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 in its 2007 World Energy Outlook”. 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”. 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. 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. 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.” 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 — The Guardian