NY TIMES:"Saddam, Chavez - $40, Here We Come!" NEW YORK TIMES:

September 8, 2000

FOREIGN AFFAIRS

"The Secret Oil Talks" By THOMAS L. FRIEDMAN

The heads of state from the OPEC oil countries will gather in Venezuela Sept. 26 to 28 for only their second top-level meeting since OPEC was founded in 1960. The meeting comes as oil prices hit a 10-year high this week at $34 a barrel. Venezuela's president, Hugo Chavez, the host of the summit, just broke the ring of isolation around Iraq and personally flew to Baghdad to consult Saddam Hussein. Here's what I imagine was their conversation.

Saddam: Hurricane Hugo, how are you? I love the way you snub the Americans. You remind me so much of Fidel. I'm sorry I can't attend your OPEC summit, but the minute I get on a plane, the Americans will either shoot it down or force it down. Just promise me you won't let the Saudis talk everyone there into keeping prices low. The Saudis keep repeating this mantra to OPEC: "The stone age didn't end because they ran out of stones. People invented alternative tools. And the oil age won't end because of a shortage of oil, but because we drive the price up so far, so fast, we stimulate alternatives." But the fact is, the price of oil today, in real terms, is a fraction of what it used to be in 1973. That's why Americans all drive S.U.V.'s. Why should we subsidize their gas guzzling?

Chavez: Brother Saddam, I couldn't agree more. Let's face it, I need the money now. Iran needs the money now. You need the money now. We all have soaring populations, we've all, frankly, destroyed the entrepreneurial middle class in our countries, and none of us want to go through the restructuring, deregulation or privatization required for globalization, because it would mean ceding power. So pushing up oil prices is our only means of economic survival. Bush and Gore say, how dare we raise prices? Oh, give me a break. I think we should propose this at our summit: We'll stop acting like a cartel if Microsoft stops acting like a monopoly. We'll cut the price of oil to its real production cost when Microsoft cuts the price of Windows 2000 to its real production cost. How's that?

Saddam: I love it! And the Americans are just playing into our hands. You'd think I was their energy secretary. They're totally unprepared for winter: U.S. heating oil inventories are down nearly 40 percent from a year ago, and crude inventories are at a 24-year low! Heating oil prices have jumped to a 10-year high because of panic that U.S. refiners won't be able to produce enough fuel to heat homes by winter. I read one story where U.S. experts were quoting something called The Farmers' Almanac as predicting it was going to be a mild winter, so they don't have to worry about us. Can you imagine? Betting your whole economy on some almanac written by farmers?

Chavez: They're @#%$y. They think everything runs on silicon now  it's all this new-economy stuff. The fact is, we're still the biggest threat to their prosperity and new economy. Without oil, baby, there ain't no bits and there ain't no bytes. We're the real dot in dot-com.

They're just depending on the Saudis to increase production. The fools don't understand the Saudis' real situation. The Saudis are $140 billion in debt, with a huge public payroll and an electricity grid so in need of upgrading they had blackouts this summer. They need cash too. Show me the money, baby! Moreover, the excess capacity the Saudis have is largely in heavy oil, not in the sweet crude the market wants. If Iran, Iraq and Venezuela cut production just a bit we could soak up any Saudi increase.

Saddam: Maybe it's time for a little October surprise. I've waited nine years to get revenge on George Bush. Now I'll get it on his son. Can you imagine if we make oil prices an issue in this U.S. election, with Bush Jr. and Cheney  the embodiments of Big Oil  running for office? Gore and Liebowitz, or whatever that Jewish guy's name is, will eat them alive.

Chavez: If either of these candidates was a real leader he would be telling Americans that they actually need to push energy conservation immediately, by raising gas taxes and aggressively reducing their dependence on us. Look who their dot- com economy depends on today  Iran, Iraq, Venezuela, Russia and Nigeria. Hah! The rogues' gallery! No serious U.S. presidential contender would tolerate that.

Saddam: Then we're safe  $40 here we come!

http://pub3.ezboard.com/fdownstreamventurespetroleummarkets.showMessage?topicID=1292.topic

-- Martin Thompson (mthom1927@aol.com), September 09, 2000

Answers

Great piece. Really enjoyed.

-- Wellesley (wellesley@freeport.net), September 09, 2000.