I’m sure you have noticed the amazing decrease in the price of oil lately. Today you can find gas at almost anywhere in Southern California for $1.43 to $1.89 a gallon. When I filled up my “on fumes” car yesterday, at Valerio, which is usually less expensive than “American name brands”, the car only needed $18.00. I looked at the 7-11 attendant waiting for the other shoe to drop and the pump was correct. I can remember when I barely got ½ a tank and coasted in hilly areas to save gas.
According to 60 Minutes transcripts:
Saudi Aramco was originally an American company. It goes way back to the 1930s when two American geologists from Standard Oil of California discovered oil in the Saudi desert. Standard Oil formed a consortium with Texaco, Exxon and Mobil, which became Aramco. It wasn't until the 1980s that Saudi Arabia bought them out and nationalized the company. Today, Saudi Aramco is the custodian of the country's sole source of wealth and power.
Over 16,000 people work at the company's massive compound, which is like a little country with its own security force, schools, hospitals, and even its own airline. According to Abdallah Jum’ah, Saudi Aramco's president and CEO, Aramco is the world’s largest oil producing company. And it's the richest company in the world, worth, according to the latest estimate, $781 billion.
Last night, the Saudi sheik in responding to Leslie Stahl’s “60 Minutes” question on “what is the foreseeable cost of oil in six months” said that if Ali Al-Naimi, the oil minister of Saudi Arabia who ran Saudi Aramco for 11 years before it was nationalized. He said if he knew what the cost would be, he would be in Las Vegas placing his bet. The special entitled, “The Oil Kingdom” produced by Richard Bonin and Kathy Lui was alarmingly frank about the recent increase in petroleum finds in Saudi Arabia, also known as “the Kingdom”.
Stahl’s concern of course was that recently the price of oil had spiked to $147/barrel. We were paying almost $4.35 a gallon for regular in July through October, in November there is a sudden decrease. He responded that their fear was that oil in Saudi Arabia was believed to be at a premium. Saudi Arabia had peaked out with available oil in reserve. However a new gusher has come in that rivels anything that the Kingdom has ever seen before. There is an increase of 260,000 billion barrels in the kingdom and that 200,000 billion more with a second discovery.
One is located in Shaybah, which means "Empty Quarter." is estimated at 18 billion barrels, under very soft red sand dunes, which is four times more than the 100,000 million barrels that the United States has in Alaska. 750,000 miles deep of highly concentrated Arab extra lite crude. So in 2009 the new facility will be implemented.
Khurais is the second location, lead by Khalid Abdulqader, project leader. It is larger than Shaybah and is scheduled to be the next 2,000,000 barrels a day still more than the total reverses in the United States. It is believed that it will take over 50 years to deplete the usage at Khurais alone. To get an idea of the size, it is larger than Indonesia and Quitar produce put together. 84 million gallons of sea water will be injected into the ground to get the oil to rise.
Currently there are more than 26 contracts, 106 subcontrators, and thousands of employees involved in this excavation. The construction steel needed alone is approximately large enough to make two San Francisco Golden Gate bridges. Cost $60,000,000,000 in cash to build the production field. The area is 300 ft across, requiring over 400 miles of pipeline. When this oil area was discovered in 1968 the sand dunes were too high and the economics to get to it was financially exorbitant to reach. Then along came the newest technology using the increased improved horizontal drilling process now making the oil more accessible.
The price of oil is a concern. The Saudis not allowing anything to be “jammed down their throat”, have agreed with OPEC to cutting their production by 1.5 million barrels a day. Iran wanted them to cut it even more and double the costs to bank roll their countries survival. And with all of this, we are lead to believe that price of Oil is NOT supposed to be a political bargaining tool. It costs Saudi Arabia nearly $2/barrel of oil. They want the cost to sell up to $75/barrel. They need $55/barrel to cover the cost to run the country and this price is where 75% of where their income comes from. The Oil minister stated that in all honesty, the “price must be good for the investor, consumer and producer”.
He believes responsible leaders of the financial market used measures to stabilize the banks activities and he will use the same measures to stabilize the oil market. Using those tools available to him to move forward and keep the oil market bountiful are his business concerns.
The question by Leslie Stahl to the sheik is, “Do they want to keep America addicted to oil?”
I believe with the cold winter coming up in the middle and eastern sections of the United States that you have to know that their response is “an overwhelming yes”. They are responsible business men seeking a profit and the they have the money and technological skills to modernize many nations.
Jum'ah said that they have invested $400 million in an experimental car with a combustion engine that reduces CO-2 emissions, increases gas mileage, and makes driving “more green”. This green technology they believe will assist America, their largest oil client, in conserving fuel consumption and their dependence on oil. I believe one would only need to recognize the amount spent on the experimentation. Yes, maybe Al Gore can continue to educate us on the effects of CO-2 emissions and the weather changes and then maybe the Kingdom may decide to invest in car production also and give the Big Three automakers a lifeline.
