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Congressman wants to stick it to Saudis

Monday, February 23, 2015 13:01

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TND Guest Contributor: Rob Nikolewski │ Watchdog.org

SOCK IT TO THE SAUDIS?: A congressman from New Mexico wants the U.S. to start imposing a fee on countries such as Saudi Arabia to defray the cost of U.S. fleets that protect the world’s oceans.

SANTA FE, N.M. — A congressman who’s ticked off at the oil ministers in Saudi Arabia has a suggestion: The United States should charge the Saudi government a fee for the U.S. fleet that protects and patrols the world’s oceans.

“When you look at their actions, there’s no doubt what the (Saudis’) target is and that’s worldwide shale,” said Rep. Steve Pearce, R-New Mexico, who made his living in the oil and gas industry and whose congressional district includes New Mexico’s Oil Patch that makes up the western portion of the energy-rich Permian Basin.

“I think they’re afraid Europe is going to start developing shale,” Pearce told Watchdog.org in an interview. “Some of the New Mexico (and) Texas companies are over there trying to do fracking in Spain recently and that’s what they’re frightened of, that those countries will do it.”

Saudi Arabia is the dominant figure in the Organization of Petroleum Exporting Countries and was the driving force behind the organization’s decision last Novemberto block calls for cuts in oil production. That caused already declining oil prices to accelerate, which has translated into falling prices at gas pumps and a crash in global crude prices.

Many energy analysts think the main reason Saudi Arabia made its decision was to put the squeeze on North American shale producers, who have seen an exponential jump in oil production in recent years through improved technology, such as hydraulic fracturing and horizontal drilling. OPEC officials deny that.

Others have theorized the Saudis have maintained OPEC production as a way to hurt its rival in the region, Iran, as well as Russia. While not a member of OPEC, Russia has cozied up to the Iranian government and has joined Iran in supporting Syrian leader Bashar al-Assad in Syria’s civil war. The Saudi government backs the Syrian rebels.

Regardless of possible political motivations, U.S. producers have pulled back since the OPEC announcement in November, laying off workers and dropping their rig counts.

Pearce thinks the U.S. government should charge Saudi Arabia and “any of the countries that are engaged in the overproduction” a fee for using sea lanes to transport their oil.

“Tankers travel the oceans pretty much without fear of piracy and that stability comes from the U.S. fleets,” Pearce said. “That’s a very expensive thing and if Saudi Arabia is just kind of working along with us and everything’s going fine and they’ve got a market share and we’ve got a market share and our products can compete with theirs on the open market, fine.

“But when they try to drive the price and manipulate an outcome, that’s when I would get more involved and say, look, we as the U.S. government are going to start requiring that you help defray the cost of securing the oceans.”

Watchdog.org sent an email to the Saudi Arabian embassy in Washington asking for reaction to Pearce’s comments, but did not receive a response.

Bernard “Bud” Weinstein, assistant director at the Maguire Energy Institute at Southern Methodist University, has doubts about Pearce’s proposal.

“Congressman Pearce makes the valid point that the U.S. bears most of the burden for protecting shipping in the Persian Gulf region,” Weinstein told Watchdog.org in an email. “But this is the result of long-standing agreements between the U.S. and members of the Gulf Cooperation Council, including Saudi Arabia. We must also keep in mind that the Saudis are allies in the fight against ISIS, so proposing a ‘fee’ for helping to secure Gulf shipping would be politically unwise at this time.”

Weinstein also disagreed with Pearce about shale’s potential in Europe.

“The most promising fields are in countries with fracking bans, and the difficulties securing licenses are so onerous that, in terms of shale plays, the (major oil companies) have retrenched all over Europe with the possible exception of the United Kingdom,” Weinstein said.

But Peace is not alone.

Just last week, economist and columnist for the Sunday Times of London Irwin Stelzer, “with considerable reluctance,” called for the United States to impose a protective tariff on Saudi Arabian oil in an article in the conservative political magazine, The Weekly Standard.

The tariff Stelzer suggested would vary according to the global oil price — “low enough to encourage continued improvement in the efficiency of the American industry, high enough to allow its survival in the face of Saudi cuts below that level.”

“The Saudis would hate it,” Stelzer wrote. “And we are told that we need their help with security operations and other matters. But encircled as they are by Iran and its proxies, they need us even more than we need them.”

Pearce did not offer specifics on how his call for charging fees would work.

“There are a lot of ways we can go without import taxes,” he said Tuesday after he delivered a speech to New Mexico lawmakers during their current 60-day session in Santa Fe.

“I don’t think we should stand by while people are struggling right now and act like it’s not occurring and the government can do nothing.”

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Rob Nikolewski is the National Energy Correspondent for Watchdog.org. He is based in Santa Fe, N.M. Contact him at [email protected] and follow him on Twitter @NMWatchdog.

Watchdog.org is an online news organization that publishes articles by independent journalists covering state-specific and local government activity. The program began in September 2009, a project of Franklin Center for Government & Public Integrity, a 501(c)3 non-profit organization dedicated to promoting new media journalism. This article is reprinted with permission.