Oil Leaders by Ibrahim AlMuhanna — pulling Opec’s strings


Not so way back, when oil costs rose, Saudi Arabia may very well be counted on to offer a decisive response. During the 2008 spike that pushed oil to $147 per barrel, for instance, Riyadh’s oil ministry fashioned a crew to guard customers — and the dominion — from excessive costs.

As Ibrahim AlMuhanna explains in Oil Leaders, “They accepted their mission because they believed that high and uncontrolled oil prices were not good for Saudi Arabia, especially in the long term.”

That now appears to have modified. As oil costs touched $120 per barrel this summer time, Saudi Arabia and its fellow members of the Opec cartel had been appearing as if “tough love”, reasonably than extra oil, was the correct response.

Just how a lot of a break that is with previous coverage is without doubt one of the insights of AlMuhanna’s memoir, which attracts on his lengthy profession as an adviser on the Saudi oil ministry. The end result, an enchanting insider’s view of half a century of Saudi oil market management, is a uncommon look contained in the cloistered world of ministry deliberations which have world implications.

It is the Saudis, in any case, who pull the strings in Opec — which observers have likened to managing a pirate ship — and, extra importantly, management the most important bloc of spare oil-production capability of any producer. The Saudi ministry works instantly with the king and different high royals to steadiness oil earnings with geopolitical issues.

Saudi Arabia’s actions, and phrases, can transfer the market. When the Saudis act, they and their cartel brethren can present reduction to stressed-out oil customers. When they don’t, resembling within the wake of the Russian invasion of Ukraine, oil customers should take it upon themselves to seek out methods to deal with excessive costs, principally by utilizing much less.

AlMuhanna’s clearest and possibly unintended message is simply how far the dominion’s refusal to carry on spare capability to calm rampaging costs has strayed from its formalised power technique relationship again twenty years.

That coverage was neatly spelt out in 2012 by the then oil minister Ali Al-Naimi, who declared, in a commentary for the FT, that top costs weren’t simply dangerous for customers. “A period of prolonged high prices is bad for all oil-producing nations, including Saudi Arabia, and they are bad news for the energy industry more widely.” Put one other method, excessive costs in the end destroy demand — a very alarming prospect for a provider resembling Saudi, which sits on an estimated 80 years of oil reserves at present charges of manufacturing.

Now, reasonably than deliberating a response to swinging costs, Opec’s conferences have develop into rubber-stamp periods, clocking in at underneath quarter-hour. The practically 10mn barrels a day of oil manufacturing taken offline in 2020 is being restored at a gentle price just below 500,000 barrels a day monthly. Seemingly nothing can coax cartel chief Saudi Arabia to ramp up sooner: not visits from US president Joe Biden or the UK prime minister, not pleas from the International Energy Agency.

AlMuhanna exhibits how various things was. While Opec — or now extra precisely “Opec+”, which incorporates 10 extra members to the cartel’s core 13 — was by no means a paragon of self-discipline, at the very least the Saudis demonstrated flexibility. When costs had been excessive, Opec’s job was “to help stabilize the oil market and to bring oil prices down”, writes AlMuhanna.

Such commentary is surprisingly frank for a Saudi creator. The kingdom is uncovered as a quota cheater, similar to all of the others. The solely oil policymakers who emerge unscathed are Saudi royals.

American presidents are dealt with rigorously, however it’s not onerous to learn between the traces. Barack Obama’s disdain for the Saudis goes unmentioned, however the creator notes that the US president bought particular help from Al-Naimi, “whose goal was to moderate oil prices in part to help President Obama win his second term election”. Donald Trump, in the meantime, is lauded for telephone diplomacy that resolved the 2020 Opec value warfare and for being near King Salman and Crown Prince Mohammed bin Salman, with whom he shared “similar opinions on many issues”

Biden will get credit score just for acknowledging the significance of US-Saudi relations. The president’s power secretary, Jennifer Granholm, doesn’t get off so calmly. AlMuhanna writes that her preliminary assembly with oil minister Prince Abdulaziz centered on renewables and local weather, ignoring the worldwide oil market. In the context of US gasoline nudging $5 a gallon, this can be a devastating revelation.

Crown Prince Mohammed bin Salman, in kaffiyeh headdress, smiles at a besuited Vladimir Putin
Crown Prince Mohammed bin Salman with Russia’s Vladimir Putin forward of the G20 summit in Osaka in 2019 © AP

Still, AlMuhanna declares “no other country in the region is a better US ally than Saudi Arabia” — even when Riyadh’s fealty will not be at all times reciprocated. A proposed “Nopec” invoice would permit US courts to prosecute oil-market manipulation by sovereign governments. The former oil adviser is simply too well mannered to say that US shale producers’ free using on Opec cuts makes them one of many cartel’s chief beneficiaries. Without Opec constraints on provide, costs would fall and shale couldn’t compete.

“I do not understand what they want,” AlMuhanna states of Nopec advocates. “Have they studied the long-term impact of an unmanaged oil market on almost all aspects? I doubt it.”

The Saudi perspective is a helpful reminder that even pleasant nations see the world otherwise. Hugo Chávez and Vladimir Putin are portrayed in much more constructive strokes than any western analyst, whereas Saudi overtures to Russia are given loads of house.

AlMuhanna rightly notes that the rise of US shale had undermined Opec’s market energy to the extent that enlarging the cartel was the one approach to retain relevance. The onset of the Moscow-Riyadh management and the Opec+ cartel is handled as a very momentous occasion, reshaping oil markets, streamlining determination making and sharpening quota enforcement.

While not a “tell-all” within the western sense, Oil Leaders is an attention-grabbing window into Saudi efforts to tame the whipsawing oil market. AlMuhanna’s take is a bit gentle on knowledge, and leaves readers at midnight on the all-important difficulty of Saudi spare manufacturing capability. But the adviser’s revelations of governance and diplomacy are gold mud, working far deeper than the 2016 memoirs of his former boss Al-Naimi. Such books are all too uncommon.

Oil Leaders: An Insider’s Account of Four Decades of Saudi Arabia and OPEC’s Global Energy Policy by Ibrahim AlMuhanna, Columbia University Press £28/$35, 304 pages

Jim Krane is the Wallace S Wilson fellow for power research at Rice University’s Baker Institute and creator of ‘Energy Kingdoms’ (2019)

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