King Salman and the Seven Dwarfs
While Western media boasted about Lady Liberty Michelle Obama appearing unveiled in Saudi Arabia, Eastern activists toasted the Saudi King's unusual exit in the midst of the Obamas' welcome ceremony.
It all happened as the U.
S.
president cut short his visit to India and dashed to Saudi Arabia with a high-profile delegation to offer their condolences on the death of King Abdullah.
King Salman, now heading the country with the world's highest oil reserves, drew a lot of attention last week as analysts around the world attempted to examine his influence on the ailing oil prices.
We'd rather focus on this distinguished Obama deputation because we think there is a lot more into it than just paying tribute to the late Saudi King.
In other words, when the leader of the world's biggest oil consuming country rushes to the world's biggest exporter and reaches there before even the closest regional allies, he must be trying to say something "really" important.
Let alone that Obama didn't bother to attend the solidarity rally in Paris 10 days earlier.
The fact is that in 2011, the U.
S.
embarked on a wild journey to increase its oil production to unprecedented levels.
Why? Because Americans consume close to 19 million barrels of oil per day, of which they only produce 11 million, while the rest is imported, mainly from Canada, Saudi Arabia, Venezuela and Mexico; in this particular order.
A brief analysis of U.
S.
oil imports in the past decade, reveals that the country was increasing its oil imports from Canada at the expense of all other exporters.
Venezuela and Mexico in particular were heavy losers, but also Saudi Arabia! Now starting 2011, the U.
S.
, which ranked second as the world's largest oil producer behind Saudi Arabia, increased its production thanks to an explosion in its shale oil industry, i.
e.
oil extracted from Bituminous shale.
As a result, U.
S.
oil production, which was just below 11 million barrels a day in 2010, jumped to 12 million barrels by December 2012.
This simply meant that the U.
S.
surpassed Saudi Arabia and officially became the world's largest oil producer with a 13% market share, while Saudi Arabia dropped to second spot.
By this time, oil analysts were already contemplating an oil independent USA, with some projecting the date as early as 2020, while others were openly calling on Congress to loosen export restrictions so the US may start exporting oil.
This production gap between the U.
S.
and Saudi Arabia kept widening until it reached its peak in June 2014! Now wait a minute, this is the same month when oil hit a year High at $107.
68 per barrel, then crashed all the way down to $53 by the end of the year! It is also the same month U.
S.
oil production started slowing from an average growth rate of 1.
8% per month to a mere 0.
34% during the third quarter of the year.
Then during the November 2014 OPEC meeting, Saudi Arabia refused to reduce supply to rescue oil prices, in what appeared to be a Saudi-American political decision aimed at hurting the Russian economy, which heavily relies on oil exports.
Putin took the shock, accepted the decision, and instead started selling his oil against what he regarded as underpriced gold.
Meanwhile, let's see what happened in the U.
S.
Last month, BP, Schlumberger, ConocoPhillips, Apache Corporation, Baker Hughes and Halliburton, all six oil companies announced layoffs.
And what was their reason? Low oil prices! We won't brag about predicting it here over six weeks ago, we'd rather confront all those analysts in Washington, who insist that the energy sector contributes only 1% to the U.
S.
GDP and hence, low oil prices are good for the American economy.
It's definitely true that American citizens are now paying $2.
04 per gallon instead of $3.
29 a year ago, but it's also true that part of this $1.
25 difference supported other industries! Oil is the blood of the economy and will remain so until a replacement is found.
Or otherwise, someone please explain to me why did US Steel announce layoffs last week?! The company itself disclosed that the decision was mainly due to lower demand from oil and gas companies.
Why is eBay cutting 2,400 jobs? And why is American Express laying off 6% of its work force during 2015? Lower oil prices may definitely entice consumers to spend more, but this alone cannot rescue the economy, and it definitely cannot prevent further layoffs in other energy companies before the small ones get completely out of business! So that's exactly why lower oil prices were pleasurable to the Saudis, but do you know who was behind this price war policy?! It was King Salman himself - who has been unofficially running the country for almost a year now due to late King Abdullah's health problems - together with his friend Ali al-Naimi, who kept his position as Oil Minister.
The Americans were fine with the Saudi oil policy for as long as it was punishing Russia and other oil producing countries around the world, but as the fire reached their own shale industry and could well spread all over their economy, Obama needed to act.
Now you know who King Salman is and why Obama raced to Riyadh first, but I'll leave it to your imagination to find out who the seven dwarfs are (smile).
It all happened as the U.
S.
president cut short his visit to India and dashed to Saudi Arabia with a high-profile delegation to offer their condolences on the death of King Abdullah.
King Salman, now heading the country with the world's highest oil reserves, drew a lot of attention last week as analysts around the world attempted to examine his influence on the ailing oil prices.
We'd rather focus on this distinguished Obama deputation because we think there is a lot more into it than just paying tribute to the late Saudi King.
In other words, when the leader of the world's biggest oil consuming country rushes to the world's biggest exporter and reaches there before even the closest regional allies, he must be trying to say something "really" important.
Let alone that Obama didn't bother to attend the solidarity rally in Paris 10 days earlier.
The fact is that in 2011, the U.
S.
embarked on a wild journey to increase its oil production to unprecedented levels.
Why? Because Americans consume close to 19 million barrels of oil per day, of which they only produce 11 million, while the rest is imported, mainly from Canada, Saudi Arabia, Venezuela and Mexico; in this particular order.
A brief analysis of U.
S.
oil imports in the past decade, reveals that the country was increasing its oil imports from Canada at the expense of all other exporters.
Venezuela and Mexico in particular were heavy losers, but also Saudi Arabia! Now starting 2011, the U.
S.
, which ranked second as the world's largest oil producer behind Saudi Arabia, increased its production thanks to an explosion in its shale oil industry, i.
e.
oil extracted from Bituminous shale.
As a result, U.
S.
oil production, which was just below 11 million barrels a day in 2010, jumped to 12 million barrels by December 2012.
This simply meant that the U.
S.
surpassed Saudi Arabia and officially became the world's largest oil producer with a 13% market share, while Saudi Arabia dropped to second spot.
By this time, oil analysts were already contemplating an oil independent USA, with some projecting the date as early as 2020, while others were openly calling on Congress to loosen export restrictions so the US may start exporting oil.
This production gap between the U.
S.
and Saudi Arabia kept widening until it reached its peak in June 2014! Now wait a minute, this is the same month when oil hit a year High at $107.
68 per barrel, then crashed all the way down to $53 by the end of the year! It is also the same month U.
S.
oil production started slowing from an average growth rate of 1.
8% per month to a mere 0.
34% during the third quarter of the year.
Then during the November 2014 OPEC meeting, Saudi Arabia refused to reduce supply to rescue oil prices, in what appeared to be a Saudi-American political decision aimed at hurting the Russian economy, which heavily relies on oil exports.
Putin took the shock, accepted the decision, and instead started selling his oil against what he regarded as underpriced gold.
Meanwhile, let's see what happened in the U.
S.
Last month, BP, Schlumberger, ConocoPhillips, Apache Corporation, Baker Hughes and Halliburton, all six oil companies announced layoffs.
And what was their reason? Low oil prices! We won't brag about predicting it here over six weeks ago, we'd rather confront all those analysts in Washington, who insist that the energy sector contributes only 1% to the U.
S.
GDP and hence, low oil prices are good for the American economy.
It's definitely true that American citizens are now paying $2.
04 per gallon instead of $3.
29 a year ago, but it's also true that part of this $1.
25 difference supported other industries! Oil is the blood of the economy and will remain so until a replacement is found.
Or otherwise, someone please explain to me why did US Steel announce layoffs last week?! The company itself disclosed that the decision was mainly due to lower demand from oil and gas companies.
Why is eBay cutting 2,400 jobs? And why is American Express laying off 6% of its work force during 2015? Lower oil prices may definitely entice consumers to spend more, but this alone cannot rescue the economy, and it definitely cannot prevent further layoffs in other energy companies before the small ones get completely out of business! So that's exactly why lower oil prices were pleasurable to the Saudis, but do you know who was behind this price war policy?! It was King Salman himself - who has been unofficially running the country for almost a year now due to late King Abdullah's health problems - together with his friend Ali al-Naimi, who kept his position as Oil Minister.
The Americans were fine with the Saudi oil policy for as long as it was punishing Russia and other oil producing countries around the world, but as the fire reached their own shale industry and could well spread all over their economy, Obama needed to act.
Now you know who King Salman is and why Obama raced to Riyadh first, but I'll leave it to your imagination to find out who the seven dwarfs are (smile).
