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The Saudis Expect Us to Pay for Oil We Don't Buy

Yes, you read it right. Here is the essence: If the Saudis (and other OPEC producers) export fewer hydrocarbons, the buyers should still pay as if they were purchasing the old amount. They should pay what the Saudis could charge when the market was tight and the demand high, and the arrangements should not made in the Arab bazaar, but by treaty. It's a nice world that Riyadh lives in. Perhaps this is King Abdullah's gracious response to President Obama's servile bow.

"Less global warming would be good, right?" ask Jad Mouawad and Andrew C. Revkin in a report in Tuesday's Times. No, they answer themselves: "Not to an oil giant."

This comes up now because of the upcoming Framework Convention on Climate Change in Copenhagen. The fact is that the Saudis (as well as the Iranians, the Venezuelans, the emirates, and other big producers) are frightened that their incomes will fall if the attendees commit themselves to "improvements in fuel economy and rising mandates for alternative fuels in the transportation sector." Yes, it could be happening ... and it could be happening this year.

Jake Schmidt, director of the Natural Resources Defense Council, has a very apt--in fact, devastating--analogy: "It is like the tobacco industry asking for compensation for lost revenues as a part of a settlement to address the health risks of smoking." In fact, if a smoker stops smoking, why don't we oblige him to pay for his cigarettes anyway?

Actually, we are not talking chump change in the petroleum industry. As the Times points out:

Saudi Arabia is highly dependent on oil exports, which account for most of the government’s budget. Last year, when prices peaked, the kingdom’s oil revenue swelled by 37 percent, to $281 billion, according to Jadwa Investment, a Saudi bank. That was more than four times the 2002 level. At one point in 2008, the average gasoline price in the United States surpassed $4 a gallon.

Saudi exports are expected to drop to $115 billion this year, after oil prices fell. American gasoline prices are hovering around $2.50 a gallon.

Rakhmones afn tavyel. Compassion on the devil. The fact is that the Saudis have just about nothing going for them except their oil. The same is true for the emirates and other little principalities here and there around the Gulf. Save that they are now not poor, they are prime instances of the intellectual and social poverty reported on in the five annual volumes of the United Nations Arab Human Development Report. They are also niggardly.

U.S. banks and other securities institutions do not depend on international conferences for their levels of compensation. As Aaron Lucchetti and Stephen Grocer demonstrate in Wednesday’s Wall Street Journal (“Wall Street on Track to Award Record Pay”), “Major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year--a record high that shows compensation is rebounding despite regulatory scrutiny of Wall Street's pay culture.”

The economic disaster from which we have not yet emerged, and which, for many of our fellow Americans, may still become more dire, hasn’t produced justice for its creators. In fact, Wall Street now is not afraid to display its ebullience which has an uglier side: arrogance. The bankers feigned a few months of shame. But, now, they are back at their own old game. And U.S. politicians and politics have been intimidated by the old miracle makers who actually created a catastrophe.

Yes, it is true. The government’s pay czar is still trying to coax a reduction in a $198 million AIG bonus package, as Mary Williams Walsh shows also in Wednesday’s Times. But, if Kenneth Feinberg actually secures that, it will only maximize the other bankers who are back where they were in 2007.

And while you’re at it reading about the scandal of the extremely well paid, please read another Times report, “Still on the Job, but at Half the Pay,” by Louis Uchitelle. Brian Lawlor was demoted from captain to first officer. He does exactly what he did before (for ExpressJet Airlines, a Continental Airlines spin-off)--he pilots his craft--but he has a different title. You can imagine what it means to earn $40,000 now--what it means economically and psychologically--when you earned $80,000 before. The story is what we used to call a human-interest story, and it is a sad one.