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“There is no free market for oil. It’s controlled by a cartel, OPEC”. Frederick W. Smith, founder, chairman and CEO of FedEx Corporation, the world’s largest transportation company did not pull back any punches in his acerbic criticism of the group consisting of 14 of the world’s major oil-exporting nations. In June 2000, Senator Herb Kohl sponsored and introduced an act which he termed ‘NOPEC” (No Oil Producing and Exporting Cartels). The quintessential objective behind the introduction of the NOPEC Act was to extend provisions akin to those contained within the Sherman Antitrust consumer protection provisions to prevent what was viewed by the proponent and backers of the bill as the practice of predatory pricing by OPEC. The Bill, however, remains enacted to this day.
Ibrahim AlMuhanna, served as an Advisor to the Minister of Energy, Industry and Mineral Resources of the Kingdom of Saudi Arabia. He is also a member of the board of directors of the Arab Gulf States Institute in Washington. In his upcoming book, “Oil Leaders”, AlMuhanna provides an insider’s perspective on the principles that form the bedrock of, and for the oil policies of Saudi Arabia, and the philosophy undergirding the functioning of OPEC. Such a perspective is provided by AlMuhanna with reference to certain key movers and shakers influencing the fortunes of the global oil industry. For after all, the price of oil has a linear correlation between market psychology and industry/government/expert pronouncements.
The book contains some revealing ‘fly on the wall’ stories. For example the Jakarta and the Amsterdam Pacts, struck amongst the OPEC members where every country agreed to adjust their production upwards/downwards in accordance with mutually agreed quotas (expressed in Millions of Barrels per Day or MBD for short), only for a few of them to renege on their commitment, or the eccentricities and ambitions of Hugo Chavez, the former autocratic ruler of Venezuela, whose short sighted oil policies reduced his nation from one of highest producers and exporters of oil into a nation struggling to manage its capacities on account of loss of expert/specialised personnel, brazen corruption and mismanagement (in fact Chavez had a special fund into which the differential between prevailing high oil prices and the disclosed oil prices were deposited for personal use of the despotic leader), are some chronicles that may for very interesting reading.
In stark contrast, the assured and composed manner in which Prince Abdulaziz bin Salman Al Saud handled the oil crisis following the COVID-19 pandemic in his capacity of the Saudi Minister of Energy, invited universal appreciation and acclaim. Roger Diwan, Vice-President of IHS Markit, called the Minister, “The Great Helmsman’. Prince Abdulaziz had demonstrated his intuitive and instinctive skills much before the pandemic struck. When two of Saudi Arabia’s major oil facilities at Abqaiq and Khurais were attacked by extremists, the world was rendered bereft of about 5.7MBD of production capacity. Drawing on the nation’s domestic and international storage capacities and reducing supply to local refineries, Prince Abdulaziz quickly alleviated the potential perils that might have plagued the world as a result of the unanticipated shortage.
AlMuhanna also discusses the roles essayed by the world’s largest producer of oil, the United States in maintaining the stability of oil prices across the globe. Presidents George Bush, Barack Obama and Donald Trump (with the exception of a few tweets slandering OPEC) all maintained excellent rapport with the OPEC nations in general, and Saudi Arabia in particular. Whenever rising oil prices formed a concern during elections (as they usually did), the US in a most unobtrusive manner allied with the OPEC to ensure an astute ‘opening of the spigot’, so that increased supply led to a reduced cost, and consequently the one foot posters signifying the price of fuel at petrol stations across the US reflected benevolent customer sentiments.
The most interesting bits of the book involve AlMuhanna’ s recounting of the tenure, triumphs and tribulations of four men, who found themselves, at various points in time, at the pinnacle of managing the energy policies and resources of Saudi Arabia. Ahmad Zaki Yamani, Hisham Nazer, Ali al Naimi and Prince Abdulaziz bin Salman, all left their own legacies behind them (the most recent one still continues to do so). In the process they transformed the fortunes of Saudi Arabia as well. Over the past 150 years or so, only three supply managers have enjoyed an enduring success: John. D. Rockefeller’s Standard Oil; the Texas Railroad Commission; and OPEC.
The suave Yamani studied law at Cairo University, before obtaining degrees from New York University and Harvard Law School. He was even once kidnapped and held hostage by the infamous and notorious terrorist, Carlos The Jackal. After his retirement, n 1990, Yamani launched the Centre for Global Energy Studies in London. Hisham Nazer drafted Saudi Arabia’s first five year development plan. Most importantly, he was responsible for the restructuring of the now behemoth, Saudi Aramco. Nazer transformed Saudi Aramco into an integrated oil company by securing exclusive rights to market the kingdom’s crude, opening marketing offices worldwide, and expanding refineries. Al Naimi started as a busboy in Aramco at the age of twelve, before going on to receive a master’s degree in Geology from Stanford University, and becoming CEO of Aramco in 1988. He was also the key force behind some major decisions landed by OPEC during his tenure.
“Oil Leaders”, an unbiased and candid insight from an insider perspective.
(Oil Leaders: An Insider’s Account of Four Decades of Saudi Arabia and OPEC’s Global Energy Policy by Ibrahim AlMuhanna is published by Columbia University Press and will be available for sale beginning 17th May 2022. Thank you Net Galley for the Advance Reviewer Copy).