Video: The Alan Greenspan of oil

By Melissa Francis Reporter
CNBC
updated 3/7/2005 5:26:21 PM ET 2005-03-07T22:26:21

The Organization of Petroleum Exporting Countries is due to meet in Iran next week and the oil market is watching members of the international oil cartel closely, searching for any hints of production changes at the world’s biggest crude oil producers.

Ali al-Naimi, Saudi Arabia’s oil minister, is one of the closest-watched members of the group. Controlling one third of the world’s proven oil supply, he’s considered one of the most important men in the world of crude oil. So important, in fact, that some have dubbed him the Alan Greenspan of the oil market.

The comparison is fitting. After all, at OPEC meetings Naimi’s expression and posture are watched with the same scrutiny as the Federal Reserve chairman receives as he walks into another Fed policy meeting. And like the Fed chairman, Naimi is often called on to soothe the turbulent energy markets.

“He is very much trying to be the central banker of oil,” said Gary Ross, CEO of consultancy PIRA Energy.

Because Saudi Arabia is the only country in the world that can open the oil production spigot and drive a significant amount of crude into the market in a matter of hours, responsibility for cooling the oil market falls on al-Naimi.

But his job has not been easy of late. The price of crude has skyrocketed, driven higher by violence in hotspots around the globe and a surge in demand from Asia. And word recently from al-Naimi that the price of oil is unlikely to moderate below the $40 level for the rest of 2005 sent turbulence throughout the world’s energy markets.

Like his mother country, al-Naimi has risen from humble beginnings to a position of immense world power. He started life in 1935, born into a Bedouin community in the harsh desert climate of Saudi Arabia, where he tended sheep as a boy.

Al-Naimi started his career in the oil business at the age of 12, as an office boy at Saudi oil producing giant Aramco. Buy the time he turned 16, he was moving up the company ladder. He later studied geology at Stanford University and by the age of 40 he had reached the top of the corporate ladder, becoming Aramco’s president and CEO.

After running one of the largest oil companies in the world, there was only one higher post for al-Naimi in the kingdom of oil. In 1995, he ascended to the position of Saudi Arabian Oil Minister.

Although al-Naimi is arguably one of the most powerful men in the world, some things can still get under his skin, including those who doubt the vast oil reserves of Saudi Arabia.

“There is some doubt as to whether we have 2 million barrels per day capacity, but the only time we have a chance to prove it is, unfortunately, when there is a crisis [in the oil market],” he said.

In fact, Naimi has taken steps to answer his critics. Most recently, he raised his forecast for Saudi Arabian oil production capacity.

But critics like Matt Simmons, a Houston-based investment banker, disagree. He says Aramco’s own data show some of the biggest oil fields in the kingdom are nearly tapped out.

“The risk that I think we’re facing is that these five to six giant great old fields are every single one of them in risk at some point, and potentially very soon, starting [to go] into a very precipitous production decline,” said Simmons.

If Simmons’ projection is accurate, it would mean that the dramatic rise in the price of oil, which started in 2004, is only the beginning. But Naimi counters that critics like Simmons just don’t understand the data.

“We are not going to start declining in 2005 as somebody projected,” he said. “As a matter of fact, the preciseness of the projection was interesting… September 2005… that is amazing… so… we'll see how it goes.”

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