[StBernard] Landrieu, Senators Vow to Block Arms Deals with OPEC Members That Drive Up Gas Prices

[Westley Annis]

Landrieu, Senators Vow to Block Arms Deals with OPEC Members That Drive Up
Gas Prices
As Oil Surpasses All Time Highs per Barrel, Many OPEC Members Producing Well
Under Their Capacity

 

WASHINGTON - United States Senator Mary L. Landrieu, D-La., and five other
Senators today called on the Bush Administration to use its leverage with
the members of the Organization of Petroleum Exporting Countries (OPEC) to
increase oil supplies or risk Congress holding up multi-million dollar arms
deals with OPEC members including Saudi Arabia,the United Arab Emirates and
Kuwait. 

With U.S. gas prices averaging $3.50 per gallon, Americans are paying more
than ever to fill up their cars, yet oil production by OPEC members remains
well below the capacity at which they could be producing. As a result,
higher oil prices are affecting U.S. consumers from the pump to the grocery
store. 

"As gas prices go up, the impact reverberates through our entire economy,"
Sen. Landrieu said.  "It not only hits American drivers at the pump, it
increases manufacturing and transportation costs which affect the price on
almost every product we buy.  All the while, foreign powers with their hands
on the spigot choose to artificially limit production to keep costs high -
and the Administration rewards them for it.  It's time to stand strong and
bring balance to this equation.  We also need to boost energy production
here at home so our economy is not as easily held hostage to foreign
interests.  Louisiana and its neighbors are America's only Energy Coast and
are proud to do our part to fuel the nation."

The letter, sent today, urges the President to be tough with OPEC allies and
not grant huge arms deals without action to relieve the economic pains
taxpayers are feeling. The letter was also signed by Senators Charles E.
Schumer, D-N.Y., Byron Dorgan, D-N.D., Bernie Sanders I-Vt., Bob Casey,
D-Pa., and Amy Klobuchar, D-Minn.

Sen. Schumer said: "The Saudis have to understand this is a two-way street.
We provide them weapons, our troops provide them protection, and then they
rake us over the coals when it comes to oil. The Saudis and Big Oil are in
cahoots and this Administration has coddled them both for far too long."

Sen. Dorgan said: "U.S. and Saudi Arabia have had a strategic alliance for
decades which anticipates that they pump sufficient oil to meet the needs of
our economy and our economic growth.  And we provide strategic military
support in the form of military equipment needed for their security. In the
past couple of years, however, the Saudis as part of the OPEC cartel have
reduced their production allowing the price of oil to go to near $120 per
barrel which has caused real damage to our economy.  Yet the Saudis expect
the United States to sell them strategic military equipment to bolster their
security.  I think if the Saudis expect us to fulfill their requirement for
strategic military goods to provide for their security they have a
requirement to be pumping sufficient oil to provide for our economic
security."

Sen. Casey said: "The Bush Administration has not shown leadership and has
not used all tools at their disposal to put pressure on OPEC nations to
increase production to provide relief from record oil prices," said Senator
Casey. "In addition to record prices at the pump, Americans are shouldering
a greater burden because Iraq's oil-producing neighbors are not living up to
their pledges of support for Iraq reconstruction and debt relief."

Sen. Sanders said: "We have a national crisis in terms of outrageously high
energy prices.  If the Saudi's and other OPEC countries continue to refuse
to increase supply, the President should ban arms sales to them.  If they
still refuse to increase production, the President should work to break-up
OPEC."

Sen. Klobuchar said: "Just as our gas prices are skyrocketing, the
administration has fallen asleep at the wheel. We need a foreign policy that
looks at every option that could help us bring these prices down."

 

OPEC Oil Production (Thousand Barrels per Day)

 

Saudi Arabia

UAE

Kuwait

2005 Average

9,550

2,535

2,530

2006 Average

9,152

2,636

2,540

2007 Average

8,722

2,603

2,460

Source: March 2008 International Petroleum Monthly

 

OPEC Spare Crude Capacity (Thousand Barrels per Day)

 

Saudi Arabia

UAE

Kuwait

2006 

1,473

267

128

2007

2,673

252

222

2008

3,456

339

300

Source: September 2007 Oil Market Intelligence

 

The text of the letter to President Bush is below:

 

April 24, 2008

 

George W. Bush

President

The White House

Washington, DC  

 

Dear Mr. President:

 

American consumers are facing unprecedented gasoline prices, with the
national average price of a gallon of regular gas at $3.56, roughly $.70
higher than last year and more than double since 2001. The price of diesel
fuel has increased even more rapidly - reaching a record $4.22 a gallon,
over a dollar more expensive than 2007.  The price of diesel fuel not only
impacts truck drivers, but it pushes food and transportation costs higher
for consumers too.  The combined effect of these energy prices drags down
our economy, which can serve to extend and deepen the recession even
further. 

 
Your administration has shown a callous indifference to the pain these high
prices are inflicting on American families. At the same time, your
administration has coddled Organization of Petroleum Exporting Countries
(OPEC) nations whose actions have contributed to this crisis.  

 
We are writing to urge you to demand that OPEC members increase their oil
production because they are currently producing well under their capacity.
As you know, the first four months of 2008 witnessed extraordinary and
historic increases in the cost of crude oil, which has impacted not only the
costs of gasoline and heating oil in the U.S., but food and commodity prices
as well. Despite skyrocketing energy costs, OPEC members claimed that they
saw no reason to increase production quotas. We respectfully urge you to
call upon Saudi Arabia, the United Arab Emirates (UAE), and other OPEC
members to increase their oil production immediately. 

 
OPEC's recent decision not to increase production before next fall at the
earliest will surely cause prices to remain high and will lead to higher
energy prices for Americans this spring and summer. Recently, Ali al-Naimi,
Saudi Arabia's oil minister, said there was no need to increase supplies by
"even one barrel of oil." And Abdullah al-Attiyah, Qatar's energy minister,
said, "Is there a need for extra production? I don't think so."

 
OPEC members have no economic incentive to increase supply of oil, because
that would lead to a drop in price. The OPEC cartel is reaping the benefits
of record profits at the expense of the American consumer and economy.
Saudi Arabia was producing roughly 9.55 million barrels per day (MBPD) in
2005, but it dropped production down to 8.72 MBPD last year.  By their own
estimates, they have the capacity to produce over 11 MBPD.  Both Kuwait and
the UAE are also producing below their total capacity. 
 
At a time when high energy prices are causing widespread anxiety among
American households, we question the merit of rewarding members of OPEC with
lucrative arms sales. The perverse incentives created by this arrangement
suggest a disregard for the devastating impact on the American economy of
high energy prices. 

 
We question why your administration would reward Saudi Arabia for its
failure to increase its crude oil production with the sale of 900 Joint
Direct Attack Munition (JDAM) kits that could top $100 million.  We question
why your administration would reward the UAE with a Patriot missile defense
deal that could be worth as much as $9 billion. And we question why your
administration rewarded Kuwait by offering $2 billion in arms sales.  All
told, in the past six months, your administration has proposed selling
almost $14 billion worth of weapons to Gulf members of OPEC who are
contributing to the global oil crisis.

 
While some of us have concerns in general about arming this region to the
teeth, should Saudi Arabia or the UAE fail to significantly increase daily
production of crude oil, we would be compelled to block any and all sales of
weapons from the United States to Saudi Arabia and the UAE, and would
consider exploring blocking additional weapons sales to other OPEC members. 

 
While we are fighting an immensely expensive war in Iraq, which the
administration intended to be paid for by Iraq's oil revenues, American
taxpayers have ended up footing the bill in the form of rising energy costs.
Meanwhile the Department of Defense continues to ship billions of dollars in
weapons systems to the very same OPEC countries enjoying the windfall oil
profits.  The American people deserve better. We look forward to your prompt
attention to this matter.

 

Sincerely,

 

Senator Charles E. Schumer                 Senator Byron Dorgan

Senator Bernie Sanders                         Senator Bob Casey

Senator Mary Landrieu                           Senator Amy Klobuchar