Welcome to Kalamna, the student blog of the Hagop Kevorkian Center for Near Eastern Studies at NYU.

Friday, March 2, 2012

Rumors of a Saudi Pipeline




As'ad Abu Khalil may have been the first English-writer to report the news, via dissident sources, that a pipeline in Saudi Arabia may have been attacked ("fire in the oil pipeline between awamiyyah and safwa," Abu Khalil wrote). 


The news, relayed out of the Kingdom through Arabic channels, quickly sent oil prices to a nine-month high in after-hours trading, a jump of nearly 2% to $110.55 a barrel. The Saudi authorities quickly denied any reports of an explosion and prices depreciated. 


But it remains an illustrative event nonetheless. Many Americans are under the false impression, consistently related in popular culture and mass corporate media, that the United States is "dependent on Mideast oil." In actuality, the U.S. buys little Saudi oil (roughly 10% of American imports are from the Gulf). The crude of al Hasa (the eastern oil-producing province) does not serve American consumption, but, rather, Saudi Arabia's vital role is as a swing producer. As Timothy Mitchell explains: 
Saudi Arabia has a low domestic demand for oil and can afford to keep much of its production capacity switched off. This unused capacity (more than 3 million barrels per day in the 1990s) was close to or exceeded the total production of any other country except Russia and the United States. The excess gave Saudi Arabia the unique ability to operate as a “swing”  producer, switching its surplus on and off to discipline other producers who tried to exceed their production quotas, thus maintaining the system of scarcity.
This system of scarcity is supposed to, in theory, maintain price stability (and economic stability). For instance, Saudi Arabia recently supplemented its exports during the Libyan Civil War when the latter's oil supple was cut off. 


The Kingdom thus acts akin to Archimedes lever:  "Give me a place where I can stand--and I shall move the world." For good or ill. 

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