Saudis Can't Find Buyers for Light Sweet Oil

President Bush is putting the political screws to Congress this week to get them to open offshore drilling and shale development to increase domestic production with the goal of lowering gas prices.

This is disingenuous - he knows it and the Saudis know it. The Saudis you say? The Saudis are scratching their heads at the high prices because they can't sell what they already have - nobody is buying right now according to a recent NY Times article about the development of the Khurais oil field. Last page, last 2 paragraphs:

With all this oil becoming available, the Aramco officials said they were baffled that the market seemed to be behaving as though there were a shortage.

“We’ve asked all the international oil companies that buy from us if they want more oil,” Mr. Nasser said. “But we can’t find customers.”

Basic economics tells us that prices should go down as supply increases and in light of the fact that the Saudis can't find buyers that must mean one of the following three:

1. we don't need oil anymore
2. there is already enough supply
3. the markets are being manipulated

My vote is 3, the markets are being manipulated because choice number 1 is obviously false, and choice number 2 would mean lower prices and less fluctuation, which we aren't seeing.

Just recently the heads of the major airlines sent a letter to their frequent flier customers asking them to contact Congress and demand legislation that will but the brakes on speculative oil markets (market manipulation) because they believe that is the major reason for high oil and gas prices, not lack of foreign or domestic supply. Read the full letter from the airline executives.

Congress responded this week by starting the process of introducing a bill that would do exactly that. President Bush responded in kind, through his spokeswoman Dana Perino:

So while they can have the vote on speculation and they can move forward on that, we think that it is critical that we start focusing on the resources that we have in our country and the ways that we can access those resources in environmentally friendly ways, including oil shale, offshore oil drilling and opening up a small bit of the Alaska National Wildlife Refuge to drilling.

While most of us would agree that we need to reduce our dependency on foreign oil, increasing our dependency on domestic oil isn't the solution - changing dealers isn't a solution to the addiction. Oil will fail eventually whether it comes from overseas or our national forests. In the meantime, using our nations resources to speed us along to that eventual day seems like a greedy reach from big business, and I'd bet that President Bush knows that is the path he is leading us on. I bet the Saudis know it too.