On Saturday June 14, 2008, the venerable Los Angeles Times printed a short letter to the editor from Gerald Wright, a city resident, which read as follows: "So 'ordinary Saudis like the idea of their nation's added wealth' and won't increase oil production. But they still expect a $1.4-billion arms deal? Why don't we raise our price to $1.4 trillion and explain that it's a simple case of supply and demand? They have oil, we have guns. Welcome to the marketplace."
This revealing missive was the reaction to a June 8 article in the newspaper, titled "Oil inflames US-Saudi ties," which highlighted existing problems between the two countries in the aftermath of 9/11.
In short, with skyrocketing prices, the very wealthy and strong are once again asking the vulnerable for assistance. Gerald Wright considers $140 per barrel for oil and $4.90 per gallon for petrol [certain stations have already topped the $5 barrier, although in Europe the average price is ¤1.5 ($ 2.32) per litre] to be excessive.
Since there is precious little that he personally can do about these supply and demand conditions, and since lack of public transportation in the megalopolis compels him to pay and drive, Wright makes a link between two seemingly unrelated matters.
What is at the heart of his diatribe, however, is a firm belief - a sentiment that is widely shared in and out of government - that the West in general and the United States in particular are in fact protecting oil producers, especially Saudi Arabia, from hegemonic powers.
In return for this largesse, it is widely assumed that cheap oil prices - which are euphemistically packaged under the "affordable" scheme - are an obligatory minimum quid pro quo. In other words, Washington's protection of Arabs, requires that the latter ensure a steady supply.
Few ever mention the role that inflation or speculations play in oil price increases. Gerald Wright may not know that the US dollar, still the premier currency for large oil sales, has lost 25 per cent over the course of the past seven years.
While it is true that global oil prices doubled since mid-2007, and quadrupled since 2003, in fact, prices at the pump are cheaper for the consumer today than in the early 1970s, after adjustments for inflation and purchasing power.
Indeed, if that were not the case, the world would not be awash in new cars and trucks, which are produced at record levels. In the United States alone, there were close to 110 million registered vehicles in 1975 (cars, trucks...) versus 250 million in 2006.
The number of vehicles in Europe jumped from 550,000 in 1918 to 165 million in 2004. The trends were similar for most developing countries. China, for example, claims that it now has about 25 vehicles - and fewer than seven cars - for every thousand people, with about 33 million vehicles on its roads.
At current sales rates, however, its vehicle park will reach 130 million in 2020. Needless to say, most of these will rely on crude oil, even if some are of the hybrid varieties.
India is in the same situation, although its notorious traffic jams are the consequences of millions of motorbikes and three-wheeled tuk-tuk auto-rickshaws, which mercifully run on slightly less polluting LNG.
In short, if prices were truly higher than in the 1970s, most consumers would not have been able to pay for these additional vehicles.
Gerald Wright and those who reason like him probably know that oil prices are affordable just as they fully appreciate the existence of competing worldwide weapons manufacturers.
In addition to high quality fare from Europe, Russia, China, South Africa, and especially Israel, leading producers are eager to reap handsome profits from "guns" sales.
But, somehow, the "they have oil, we have guns" comparison means a lot more than a mere exchange, when a minor $1.4-billion arms accord is bumped to a whopping $1.4 trillion tag. Somehow, we are no longer in the marketplace, but at Disney's fantasyland. Oil for guns is transformed for cheap oil versus expensive guns.
Recent decision
Before its most recent decision to increase daily oil production by 200,000 barrels, Saudi Arabia was pumping 9.5 million barrels per day, which is near the country's 11 million ceiling.
Riyadh might possibly increase its daily production by another million or two per day, but this will not make a long-term difference given insatiable global requirements.
Rather than spew venom and make moronic comparisons, the Gerald Wrights of this world better come to terms with certain facts, including that everyone faces similar dilemmas.
That nonrenewable oil deposits are predominantly concentrated in the Arab World. That they are being depleted at a rapid rate and, at current production levels may be completely exhausted in about 30-50 years. That scientists better embark on in-depth research efforts to develop the necessary post-petroleum fuels for a variety of needs but especially transportation.
And that the world devote a small portion of what it spends annually on wasteful military expenditures to address our basic needs for energy.
Dr Joseph A. Kechichian is a commentator and author of several books on Gulf affairs.
