The Saudi Problem
Saudi Arabia spearheads the worldwide Islamist movement by the establishment of educational institutions around the globe dedicated to reawakening the jihadist ideology. A vast recruiting and training network produces hate-filled warriors eager to kill anyone in their path for the glory of Islam. Saudi powerbrokers finance global terror groups from Hamas to Al Qaeda. (See our review.) The time has come to reconsider our repugnant association with these duplicitous international criminals. What should we do in the face of this threat? Let’s start by severing all ties with Saudi Arabia – military, trade, travel, and diplomatic.
Impossible, you say? Given that 15% of our oil imports originate in Saudi Arabia, the idea of ending our Saudi trade relationship is deemed unimaginable or only possible in the distant future after the development of alternative sources of energy. Neither political party dares suggest such a move in the current context. Unfortunately, the economics is poorly understood but far worse, moral leadership is next to non-existent. First the economics:
Oil is a commodity. Like any commodity its price is determined by the market and it can be sold and resold any number of times. Oil isn’t made-to-order for a particular buyer like a custom suit from one’s personal tailor. The production, purchase, resale, and consumption of oil in today’s modern global economy are determined by market forces – not personal relationships. The path from producer to consumer is spontaneously rearranging.
The production of oil is driven by producers’ needs – not our needs – and will continue even if we refused to buy another ounce. Over 90% of Saudi export revenue comes from oil – 40% of their GDP. They have to sell oil to eat; they are not doing us a favor. Given the drop in the standard of living of the average Saudi – more than half since the early 80s – the Saudi capacity for withholding oil on a sustained basis is severely limited by political considerations.
The modern international oil market is governed by a vast trading network. I’m told by Energy traders that a barrel of oil will change ownership more than a dozen times before it reaches your car’s gas tank. Trying to mark a barrel of oil and control its final destination is an exercise in futility. Even if the Saudis sold only to non-American companies, not much changes. These companies either sell to us or they must reduce purchases from their previous suppliers – who, in turn, would have supply available for our companies.
But what are “our” companies? Oil companies are owned by the individual stockholders who live all over the world. Some companies have headquarters based in America; others, like British Petroleum (BP) or Royal Dutch Petroleum Company (Shell) have their headquarters in Europe. Does it matter to us where the CEO has his desk? Multi-national corporations are only nominally associated with a particular flag.
Let’s assume the initial Saudi reaction is to reduce production and delve into savings. That, of course, will raise market prices and hurt all consumers worldwide. And it could not last – sand just doesn’t fill the stomach. Consider, also, the removal of American personal; this will have a devastating affect on Saudi production – but only until French and Germans take their places. After a transient effect, the economics of oil remains unchanged.
Now, forget everything I just said about economics. Most people don’t understand economics and their fears will not subside. What is needed is moral leadership to maintain resolve in the face of uncertainties and to maintain strength of character during near term periods of want. In life one makes choices – moral choices – without knowing how to insure one’s goals or satisfy one’s desires. Maintaining moral discipline is both the honorable and prudent path in the long run.
In Iraq and Afghanistan, we have sent dedicated men and women into war to fight a vicious and loathsome enemy. As our brave fighters risk their lives or, in many cases, die in combat, it is surely appropriate to expect those of us in the comfort of our homes to tighten our belts and go without for the duration. If some believe our actions against Saudi Arabia will cause higher oil prices, we should be ashamed to complain about such hardships at a time like this.
As the Saudi enemy is sending suicide bombers across the borders to kill our troops, we cannot be hesitant in responding to these acts of war. If trained jihadists from the worldwide network of Saudi-funded Islamic schools turn up in Iraq, we cannot continue business as usual with these religious despots. From Afghanistan to Algeria to the Philippines to Nigeria and to a church in Bethlehem, Saudi money, teachings, and trainings bring endless jihadist terror. When will we take a moral stand? When will we identify the enemy? If not now when?
Impossible, you say? Given that 15% of our oil imports originate in Saudi Arabia, the idea of ending our Saudi trade relationship is deemed unimaginable or only possible in the distant future after the development of alternative sources of energy. Neither political party dares suggest such a move in the current context. Unfortunately, the economics is poorly understood but far worse, moral leadership is next to non-existent. First the economics:
Oil is a commodity. Like any commodity its price is determined by the market and it can be sold and resold any number of times. Oil isn’t made-to-order for a particular buyer like a custom suit from one’s personal tailor. The production, purchase, resale, and consumption of oil in today’s modern global economy are determined by market forces – not personal relationships. The path from producer to consumer is spontaneously rearranging.
The production of oil is driven by producers’ needs – not our needs – and will continue even if we refused to buy another ounce. Over 90% of Saudi export revenue comes from oil – 40% of their GDP. They have to sell oil to eat; they are not doing us a favor. Given the drop in the standard of living of the average Saudi – more than half since the early 80s – the Saudi capacity for withholding oil on a sustained basis is severely limited by political considerations.
The modern international oil market is governed by a vast trading network. I’m told by Energy traders that a barrel of oil will change ownership more than a dozen times before it reaches your car’s gas tank. Trying to mark a barrel of oil and control its final destination is an exercise in futility. Even if the Saudis sold only to non-American companies, not much changes. These companies either sell to us or they must reduce purchases from their previous suppliers – who, in turn, would have supply available for our companies.
But what are “our” companies? Oil companies are owned by the individual stockholders who live all over the world. Some companies have headquarters based in America; others, like British Petroleum (BP) or Royal Dutch Petroleum Company (Shell) have their headquarters in Europe. Does it matter to us where the CEO has his desk? Multi-national corporations are only nominally associated with a particular flag.
Let’s assume the initial Saudi reaction is to reduce production and delve into savings. That, of course, will raise market prices and hurt all consumers worldwide. And it could not last – sand just doesn’t fill the stomach. Consider, also, the removal of American personal; this will have a devastating affect on Saudi production – but only until French and Germans take their places. After a transient effect, the economics of oil remains unchanged.
Now, forget everything I just said about economics. Most people don’t understand economics and their fears will not subside. What is needed is moral leadership to maintain resolve in the face of uncertainties and to maintain strength of character during near term periods of want. In life one makes choices – moral choices – without knowing how to insure one’s goals or satisfy one’s desires. Maintaining moral discipline is both the honorable and prudent path in the long run.
In Iraq and Afghanistan, we have sent dedicated men and women into war to fight a vicious and loathsome enemy. As our brave fighters risk their lives or, in many cases, die in combat, it is surely appropriate to expect those of us in the comfort of our homes to tighten our belts and go without for the duration. If some believe our actions against Saudi Arabia will cause higher oil prices, we should be ashamed to complain about such hardships at a time like this.
As the Saudi enemy is sending suicide bombers across the borders to kill our troops, we cannot be hesitant in responding to these acts of war. If trained jihadists from the worldwide network of Saudi-funded Islamic schools turn up in Iraq, we cannot continue business as usual with these religious despots. From Afghanistan to Algeria to the Philippines to Nigeria and to a church in Bethlehem, Saudi money, teachings, and trainings bring endless jihadist terror. When will we take a moral stand? When will we identify the enemy? If not now when?
posted by Jason Pappas at 11:29 PM
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