A Former Diplomat Comments | Russell T. Rudy Energy LLC
Edward Djerejian served as a diplomat in eight administrations and is currently the director of Rice University’s Baker Institute for Public Policy. A recent article in “World Oil” reports his remarks as a speaker at the annual meeting of the Independent Petroleum Association of America.
According to Djerejian, the Saudis are trying to protect their share of the international oil market as they have consistently stated. However, in his opinion, they are also trying to affect Russian and Iranian oil production and exports. He went on to say that he expects supply and demand to come back in balance over the next year as the Gulf nations in general, and the Saudis in particular, cannot keep up the current levels of production at depressed prices. Djerejian pointed out that Saudi Arabia’s credit rating has already been reduced from double-A to single-A.
The Desert Kingdom has a very expensive social welfare program that it must maintain in order to insure political stability. To generate enough cash to pay for these social programs, the government needs a price of $96-105 per barrel. Consequently, they cannot afford to maintain maximum production at $45 a barrel. The royal family has been traumatized by the shale revolution in the U. S. and is currently looking to Asia for future demand growth for their crude.
Djerejian also feels that the U. S. has lost influence in the Middle East. He cites Syria as an example. When Hafez-al-Assad was president, he joined the coalition which overthrew Sadam Hussein. However, in the power vacuum created when the U. S. disengaged in the region, Russia moved in and currently controls the Syrian agenda completely.
The current administration also came in for harsh criticism in Djerejian’s remarks. He decried the recent decision to kill the Keystone pipeline. He elaborated, “Oil sands follow the oil price. If the price goes up, there will be more oil sands development. Stopping the Keystone XL will not stop oil sands development. I don’t get it (Obama’s reasoning). This administration does not understand the energy sector at all. They view it through the prism of Big Oil and big profits, and the environment. They don’t understand how vital it is to the economy and the private sector.”
To read the article in its entirety, please go to http://www.worldoil.com/conference-news/2015/11/10/veteran-diplomat-confirms-consensus-view-at-ipaa-on-saudi-oil-prices .
