The Greenspan of oil turns on the spigot
Rarely have we seen such universal acclaim from the MSM for an industry figure. Newsweek called Saudi Oil Minister Ali Naimi the Alan Greenspan of energy, and the world’s most listened-to muse. Here’s a little information on the man the NYT called “OPEC’s most authoritative voice”, a fellow who reportedly started working for Aramco at age 12. :
Naimi is widely regarded as the most influential Saudi oil minister, ever. Where the Fed uses the U.S. money supply to stabilize world markets, the Saudis use vast oil reserves. When Hurricane Katrina cut U.S. refining capacity, Naimi soothed markets by quickly declaring that Saudi Arabia would make up the shortfall. In March 2003, with war raging in Iraq, Riyadh announced it was ready to tap its excess capacity of 2 million barrels per day to ensure a steady supply.
A Stanford grad in geology who jogs every morning, Naimi works easily with Westerners, but is as fiercely independent as any central banker. He has built up Saudi oil exploration skills in a country once dependent on American or European expertise….
Born to a poor family, he was raised among Aramco tanker trucks and drilling rigs. As a 15-year old clerk, according to Aramco lore, he vowed he would one day take the helm, which he did in 1984. When he became Oil minister in 1995, OPEC was in trouble. Members were defying production caps as oil prices sagged. “Naimi’s performance has been fantastic,” says Leonardo Maugeri, a senior vice president of Italian energy giant ENI. “Few people know how difficult it is to impose discipline over OPEC, and he did it.”…
Naimi, 71, is also the last of a cosmopolitan generation that rose on merit, rather than filial ties to the monarchy. He came of age at Aramco when it was still an American finishing school for oil technocrats and engineers. That period ended with the nationalization of Aramco in the early 1970s. “Naimi is from the last generation that was exposed to different ways of doing things, both in Saudi Arabia and the U.S.,” says Edward Chow, an oil consultant and former Chevron executive who has worked closely with Aramco. “What happens after him? There are probably a lot of princes who would like his job.” But there are few who can match his savvy in protecting Saudi oil interests.
Naimi has now told an industry conference in New Delhi that Saudi Arabia plans an enormous increase in capacity within a very few years (via AP):
Saudi Arabia plans to increase its crude oil production capacity nearly 40 percent by 2009 and double its refining size over the next five years to keep pace with growing global demand, the country’s oil minister said Thursday. Ali Naimi said the plans are part of a $80-billion-commitment that Saudi Arabia — the world’s biggest oil exporter — has made to increase oil supplies in the global market…
Saudi Arabia, which has a quarter of the world’s proven oil reserves, has a significant stake in ensuring stable markets, Naimi said. It plans to expand crude production capacity to 12.5 million barrels a day by 2009 from 9 million barrels now. And if market conditions demand, the country has identified additional projects to further boost capacity after 2009, he said. Saudi Arabia is also making substantial investments in refineries within and outside the country so to double its refining capacity to 6 million barrels a day over the next five years…
After his arrival in New Delhi on Tuesday, Naimi said he felt the global oil market was moving in the right direction — remarks that prompted crude prices fall to a 20-month low of $50.28 a barrel Wednesday. “Prices needed to be high enough to give adequate returns to producers without hurting consumers,” Naimi said.
No doubt the need for additional capacity is justified on a business basis. However, the producer with the biggest spare oil production capacity wields enormous political power, because of that commodity’s importance and its inelastic short-term supply curve. So the move by Naimi clearly serves Saudi Arabia’s political interest. In addition, we can’t help thinking about Iran’s self-destructive oil policies, which may reduce its exports to zero by 2015, as we have previously discussed. In addition, what are the implications, if any, of this promised future capacity in terms of a possible Iran/US conflict in the next year or two?