On February 25, The New York Times published an article by Clifford Krauss, “Lower Oil Prices Force Saudis to Widen Their Circle of Friends.” The article was quite offensive starting with the accusation that over the years, as the “dominant force in oil” Saudi Arabia has left the “world at the mercy of its ambitions and its interests.” It went on to claim that “the kingdom must refresh its strategy to reflect a weaker hand - and in many ways, a different game.”
The New York Times’ article is full of contradictions. If Saudi Arabia is losing its dominance in oil and losing its power in OPEC, why is it that the Kingdom shoulders most of the output cut share of 41%, while bringing to market 31% of OPEC’s crude production?
The New York Times article claims that Saudi Arabia “created a global glut of oil to gain market share in the mid-1980s.” Unfortunately, the New York Times article overlooked the fact that the slump in oil prices in the mid-1980s was attributed in part to the surge in US Alaskan oil production, which eventually reached two million barrels a day, a major contributor to the supply glut. One must wonder if the New York Times knows that in 1985, Saudi Arabia’s oil production declined to a historical lows from 10 million per day in 1981. Saudi Arabia made a major economic sacrifice when no other nation was inclined to do so.
Yes, Saudi Arabia is the world’s largest oil exporter and that’s not a crime. The Kingdom will remain a crucial supplier to key energy consumers globally! Saudi Arabia has also become one of the world’s leaders in crude oil refining , or shouldn’t the Kingdom be allowed to provide value-added products to the world – to be simultaneously a major player in refined products as well as crude oil?
Lately, US exports are once again surging at a time when other major producers, including Saudi Arabia, have been cutting back to stabilize the global crude oil market. That’s a situation eerily familiar to the mid-1980s. Thus, it must be wondered if the New York Times knows the topic at hand or is simply suffering from delirium. Perhaps the newspaper has difficulty comprehending the huge economic and social transition underway in Saudi Arabia, which will advance the Kingdom’s ranking among the G-20 nations with less dependence on oil income!
With the implementation of Vision 2030, Saudi Arabia’s sources of income will be diversified. In the long-term, the Kingdom’s dependence on oil revenues will be reduced by cutting costs and diversifying its sources of income. This is vital given that the steep oil price fluctuations over the years aren’t a firm foundation for a stable economy.
It seems that the New York Times has forgotten to acknowledge Saudi Arabia’s historical and ongoing role to balance and strengthen global oil markets. As the top oil exporter, Saudi Arabia still uses international oil markers (Benchmarks) for pricing its crude oil sold to the USA, Europe and Asia. Instead, the Kingdom could have used its own crude oil as a marker with more transparency than that governed by the forces of supply and demand reflecting the market’s fundamentals and actual market's sentiments, with better assessment for the price reporting agencies!
Why hasn’t the New York Times shed some light on why Saudi Arabia has been a price taker while they are entitled to be a price maker – thereby maximizing revenues? Saudi Arabia continues to make sacrifices for the global good. If it were really out to push its own “ambitions and interests” as the New York Times claims, the Kingdom would definitely go beyond the traditional crude oil marketing practices to those that offer the potential for bigger returns.
Will we still hear this “delirium” from the New York Times after Saudi Arabia successfully implements its vision 2030 goals and advances economically with less dependence on oil? Or perhaps they could be on the lookout for other more interesting stories?!
Dr. Faisal Mrza
Energy and Oil Marketing Adviser (Former OPEC / Saudi Aramco)