Stanford EDGE 297A - Oil - Exposing the Saudi Arabian Royal Family

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SeniorOilThe Royal FamilyModern Saudi ArabiaThe Saudi PeopleThe United StatesThe Royal FamilyIslamThe Arab WorldConclusionReferences“Bin Laden hates Saudis, too,” The Economist, April 24 2004: 44.Dore Gold, Hatred’s Kingdom, (Washington, D.C.: Regnery Publishing, Inc., 2003).Nimrod Raphaeli, “Saudi Arabia: A Brief Guide to Its Politics and Problems,” Middle East Review of International Affairs, 3 September 2003 <http://meria.idc.ac.il/journal/2003/issue3/jv7n3a2.html> (31 May 2004).“Still at its mercy,” The Economist, May 22 2004: 10William Powell, Saudi Arabia and its Royal Family, (New Jersey: Lyle Stuart Inc., 1982).Appendix AAppendix BMap & Graph: Energy: Oil reserves (Top 100 Countries)Appendix COilExposing the Saudi Arabian Royal Family, U.S. foreign policy, andthe poverty currently occurring within Saudi ArabiaGarrett JohnstonMay 31st, 2004EDGESeniorPrefaceThe current world dependence on oil leaves much to be said about the impact of Saudi Arabia and the Middle East on foreign policy and international politics. Presently the world’s largest consumer of oil, the U.S. depends on Saudi Arabia and much of the Middle East for the energy to run its businesses, its homes, and most importantly, its automobiles. In the past few months U.S. consumers have felt the pressures of increasinggasoline prices as they struggle to commute and live their daily lives. This leaves the U.S. with important decisions to be made on behalf of its citizens and its position in the international realm.Saudi Arabia, the leader of OPEC (Organization of Petroleum Exporting Companies), maintains a powerful position in negotiations with the U.S. and other countries. Its vast supply of oil directly effects per barrel pricing and is a unique bargaining tool in international politics. But Saudi Arabia is no ordinary country in today’s world. Its borders are governed by a royal family of nearly 30,000 individuals, all of which share most of the wealth and almost all of the power. Its people, with foreignexceptions, are wholly Islamic and many practice the faith with a frightening sense of devotion. And despite the immense revenue generated by its oil reserves, part of its population still lives in absolute poverty.1 Although recently it has seen immense change,it is still a country fair behind the progressive world.This report draws from many publications written over the last twenty years exposing the unique situation in Saudi Arabia, while also utilizing recent headlines in magazines like The Economist and internet publications to share a more up-to-date 1 Evidently Saudi Arabia chooses not to report the percentage of their population living under poverty. Thisinformation can’t be found on the website of the World Bank or from any other organization collecting this type of information.portrayal of the conditions within the country. Its main focus is to explain the incentives of each group involved in the Saudi Arabian situation, and heavily criticize groups acting in their own interest rather than that of Saudi Arabia. Finally, it will make a recommendation for all groups to promote democracy and a stronger economy within Saudi Arabia. Hopefully, it will serve as an enlightening tool for an incredibly important,yet strangely unique and complicated dilemma.OilThe current growth in the world economy only partially explains the high per barrel amount being paid for oil in today’s markets. Since January of 2004 oil prices have risen from under $35 per barrel to a record high of $42.33 on the New York Mercantile Exchange (See Appendix A).2 At first glance it could be assumed this increase in price is due to a lack of supply that could meet the current demand. However,a recent article in the The Economist explains, “Three related things, or so it seems: surging demand; petroleum-distribution bottlenecks, especially in the United States; and speculation aimed at pricing in the risk of some big future setback in supply.”3 Surging demand can be clarified by the growth in the world economy, especially in the United States where the market is on the upswing and the summer driving season has arrived. The distribution bottlenecks should eventually clear and will probably drop prices below $40 per barrel. But the most important factor to consider is speculation over the availability of supply. This is being affected by both an unstable Iraq, and more 2 Banerjee, Neela, “Oil Prices Set Another Record, Topping $42,” The New York Times, 2 Jun 2004.3 “Still at its mercy,” The Economist, May 22 2004: 10.importantly, a new terrorist threat on oil reserves in Saudi Arabia. If al-Queda were successful in shutting down oil production in Saudi Arabia it would be a crisis proportional to the oil crisis of the 1970s. In fact, on June 1st oil prices jumped to their record high due to the killing of 22 foreign workers Khobar, Saudi Arabia.4Although it can be argued the world is much better prepared for instability in the oil market due to spare oil reserves, Saudi Arabia still sits atop the largest supply in the world and also controls OPEC (See Appendix B). It remains what many refer to as the “swing producer” able to influence the markets with proposals to increase their production quotas and with the ability to encourage other oil producers to increase the amount they produce. It still leads in oil exports per year, and easily contains the largest reserves, although the Saudi’s won’t release exact amounts. Recently many have argued Saudi oil is under pressure from new reserves like Russia, West Africa, and Alaska; but even these reserves combined do not come close to Saudi reserves.5 Clearly, Saudi Arabia remains drastically important to oil prices and production.Although fifteen of the nineteen suicide attackers on September 11 were from Saudi Arabia, and Osama bin Laden and the bin Laden family all originated in Saudi Arabia, al-Queda now chooses to target the Saudi Arabian government, most recently in April 2004 when a police station in Riyadh exploded killing four people and wounding 150.6 And if the attacks in Khobar on foreign oil workers are attributable to al-Queda terrorist cells, it will become difficult to deny that terrorists are a legitimate threat to Saudi oil reserves. Although most Saudi Arabians hardly support al-Queda or bin Laden, these threats could have a devastating impact on future oil prices. 4 Banerjee, Neela, “Oil Prices Set Another


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