U.S. arms for Saudi oil?

HERALD SUN CAPTION: Arabian knights: President Bush's car is escorted by riders as he arrives at the guest palace in Riyadh. Picture: AFP

UPDATED BELOW

The Herald Sun in Australia reports an arms deal with Saudi Arabia "to counter Iran's growing military clout." Snip:

Just hours after [Bush's] arrival for the first time in Riyadh, the US Administration said it had notified Congress of its intention to offer the Saudis a controversial package of advanced weaponry as part of a multi-billion-dollar deal with Gulf Arab allies.

Precision-guided bomb kits, or "smart bombs", would give the country's armed forces highly accurate targeting abilities.

[Keep reading... more after the jump.]

But the deal has raised concerns in Israel and among some of its allies about the military balance of power in the region.

The sale appeared to be part of Mr Bush's effort to persuade Saudi Arabia, one of the Arab world's most influential states, to help contain Iran and offset what he has branded a danger to world security.

USAToday headline announces, "Saudis rebuff Bush's call for increases in oil production." Bush had requested that OPEC "increase the supply of oil in hopes of lowering gas prices and avoiding a U.S. recession." What did the Saudis say?

...Saudi Arabia's oil minister said such action would be premature.

"We will raise production when the market justifies it," says Ali Al-Naimi, minister of petroleum and mineral resources for the world's largest oil-producing nation.

Bloomberg News added:

Saudi Arabia has held back about 2 million barrels a day of oil that could be supplied to the market if needed, Naimi said.

And so the horse trading begins. Was the Strait of Hormuz kerfuffle with Iran -- which turned out to be a hoax -- fronted as justification for a U.S.-Saudi arms deal to ultimately cajole more oil out of OPEC? I dunno but all of this smells...greasy.

UPDATE: Via Iran Nuclear Watch:

Yesterday, the Bush administration initiated the formal 30-day notification process for the proposed sale of 900 Joint Direct Attack Munitions (JDAMs) to Saudi Arabia. In response, my colleagues Travis Sharp and Katie Mounts released a report they have been working on for some time arguing that the administration continues to use deadly technologies as the flawed currency of friendship with foreign nations.

The report concludes that instead of working with countries to improve political freedom, the $20 billion sale rewards an oppressive Saudi monarchy whose human rights record has not met expectations of improvement following the accession to the throne of King Abdullah in August 2005.

Report available from the Center for Arms Control and Non-proliferation.

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A hundred bucks a barrel by the end of the day?

Updated Below

Anyone feel like wagering?

CNN just reported that for the first time ever, the price of light, sweet crude oil has topped $99 a barrel, and hundred-dollar oil is "the next target to hit," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

The surge in the price of oil, in a short trading week, underscores the bull-run on oil, and winter, with higher consumption of heating oil isn't even here yet.

This might be an opportune time for a trip down memory lane...

In January 2001, when Bush took office, OPEC convened a meeting in Houston where the biggest concern of the member nations was a price collapse and they took steps to institute a price band that would maintain the price between $22 and $28 per barrel.

If OPEC were to narrow the price band, political expediency on the home front would probably result in a price band centered around $25 per barrel. Unfortunately for OPEC nations this price band would likely come under threat within a year. The last report had non OPEC production up by 700,000 barrels per day and non OPEC production will continue to increase as long as prices remain much above $20 per barrel. If these increases are accompanied by weaker world economies OPEC will have to reduce its market share to maintain prices. At some point OPEC will have to make the decision that it usually faces twice a decade. It must choose price or market share, but it cannot have both. A price than can be maintained with market chare is closer to $20 per barrel than to $25.

What's left to say? "Heckuva job, Bushie"?

I need a valium and a drink...and it isn't even 3:00 PM in New York...

Update:

Oil topped at $99.29, but the Dow Jones fell 211.10 points, or 1.6%, and the decline was matched by the Standard & Poors. The dollar fell to $1.48 against the Euro.

From the New York Times:

“This is an ugly week,” said James Paulsen, chief investment strategist at Wells Capital Management. Indeed: the Dow lost 2.9 percent of its value in the last three days alone.

Some market watchers suggested that lower trading levels during a holiday week make the market more volatile, but at least one analyst disputed that notion. “I don’t know of anyone taking a day off today,” said Dennis Davitt, who oversees equity derivative trading for Credit Suisse. “Not in these conditions.”

Crude oil futures briefly rose above $99 in overnight trading and an Energy Department report showed that inventories fell slightly last week, leaving investors wondering how soon oil will be nudged above its inflation-adjusted record of $102. Crude settled in New York trading at $97.29, down 74 cents.

The recent run-up in oil prices, which threaten to curb consumer spending, dovetails with a shaky economic outlook released by the Federal Reserve yesterday, which predicted a slowdown in growth over the coming months.

So...Happy Holidays, y'all...

[That's all, folks...]

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