Here we go again

One of these days, the financial media is going to give up its decades-long refrain of, “The Saudis will always pull our collective butts out of a sling by keeping the price of oil steady and reliable.”

But that day has not yet come, witness the New York Times story this weekend headlined, “Saudi Officials Seek to Temper the Price of Oil.”  The lede:

Saudi Arabia, which benefited immensely from record oil prices last year, has sent signals in the past two weeks that it is committed to keeping oil at around $50 a barrel — down $27 a barrel from the summer peak that shook consumers across the developed world.

Those signals consist of the Saudi oil minister’s recent declaration that his country’s policy is to “moderate prices,” and the Saudis’ nixing an emergency OPEC meeting.  But added to this mix is a meme we caught onto very early here at the Desidooru Saloon: The notion that the Saudis (and the Americans) want to keep oil prices low to put the screws to their arch-enemy, Iran.  Notes the Times:

How much influence the United States has exerted is an open question. Vice President Dick Cheney met with King Abdullah of Saudi Arabia in Riyadh in November, but his office would not say if oil was discussed. The White House has been supportive of Saudi energy policy, and President Bush and his father are close with Prince Bandar bin Sultan, the Saudi national security minister and former ambassador to Washington.

Although Saudi officials say their oil policy is based on market considerations and not political ones, the meeting in November led to renewed speculation that the kingdom might be tempted to dry out IranÂ’s ambitions by pushing oil prices down. Prices have already been falling because of mild weather and slowing demand.

I suspect this is a new line of administration-sponsored disinformation about the Cheney-Abdullah meeting.  Recall that after a couple of weeks of total secrecy about what transpired, it emerged that Abdullah told Cheney that if U.S. forces pull out of Iraq, the Saudis will start funding the Sunni insurgency to prevent a slaughter at the hands of the Shiites.  But it sounds a lot better from Team Bush’s perspective if instead they just talked about how to make trouble for Tehran.

As we’ve pointed out before, none of this talk takes Peak Oil into account.  It’s as if the depleting giant fields, the ever-increasing amounts of water being pumped into those fields, all the new drilling with no added production to show for it, just didn’t exist.  It’s simply off the financial media’s radar.

And let’s not forget, if the Saudis somehow do manage to keep oil prices at or near current levels, that means the oil-exporting countries have less wherewithal to soak up Treasuries and prop up the dollar.

But all of that is too complex and too messy for reporters to wrap their minds around.  So instead, the Times gives us happy talk like this:

Prices at $50 to $55 a barrel are just about right for the Saudis, according to Saudi energy officials — not too high to hurt the global economy, not too low to hurt their own economy. Last year’s record highs meant that the growth in global oil demand slowed to 1 percent in 2006, compared with a 4 percent increase at its peak in 2004.

“Just right,” huh?  I guess now we have a Goldilocks oil price to go along with our Goldilocks economy.

The Daily Reckoning