Why the Saudis May Not Rescue Oil Markets This Time

[UpInArms]

http://www.nytimes.com/2004/05/16/business/yourmoney/16saudi.html

SAUDI ARABIA'S oil minister, Ali al-Naimi, is not given to making bland comments about the price of oil. So, after he suggested last week that OPEC increase production in an effort to bring down the highest oil prices in 13 years, global energy markets scrambled to sort out the implications of what he had said.

Were the Saudis trying to force the hand of the Organization of the Petroleum Exporting Countries, which convenes informally in Amsterdam next weekend, ahead of a meeting in Beirut in June? Was Mr. Naimi signaling that Saudi Arabia was prepared to increase its own production soon, easing policies that have generated a windfall for his nation over the last two years?

Global demand for oil is growing faster than at any time in the last 15 years, fueled by robust economies in China and India and a recovery in the United States, according to the International Energy Agency. Now energy industry executives are waiting to see whether Saudi Arabia can make the difference it once did.

"Saudi Arabia is still the greatest swing player, in terms of quickly being able to get the spigot on and off," said Adam Sieminski, an energy strategist at Deutsche Bank in London. "They're fierce in trying to protect their influence and market share, but, like the rest of us, they've been working in an incredibly volatile geopolitical scene."

Saudi Arabia rarely fails to remind the markets that it is the only producer with enough spare capacity to have a rapid effect on oil prices by increasing or decreasing production. Technicians in the control room at the headquarters of Saudi Aramco, the national oil company, assert that in about 48 hours, and without much effort, they can increase output by 1.5 million to 2 million barrels a day. Saudi Arabia already accounts for about one-tenth of the world's oil production, with more than 8 million barrels a day.

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Is this to do with SA "saving the day" for *Co?

[theivoryqueen]

1. What if the rising price of oil

has more to do with diminishing resources than simple market manipulation? The saudis have one product to sell - oil. They could try to sell sand, but most countries already have a lot of that. If you are a savvy business person, you aren't motivated to reduce prices on your primary - and hugely popular - product during times of peak demand while faced with eventual exhaustion of your sole cash "crop". Why would they sell now, more cheaply, when they can hold on to their product and continue to sell at higher prices as oil becomes more scarce? Once they sell all their oil - that's it. Their position of power over oil dependant consumers is over.

[billbuckhead]

2. But the Saudis also have a bunch of American assets both in stock and $

The Saudi princes play both sides against the middle with a lot of help from the military-industrial-banking-espionage complex.

[theivoryqueen]

3. zats true

they have managed to convert their main claim to economic fame - oil - into money with which they have invested heavily in foreign markets.

[notadmblnd]

5. I think it's entirely manipulation.

I read an article here last month that SA was going to decrease crude output by a million bbl's (a day) I think that happened and prices have skyrocketed. I also read here that when they meet here in the next couple of weeks SA will talk about increasing crude output to 1.5 million bbls.

[jmcgowanjm]

4. Saudiis are pumping at capacity

Ghawar is evidently in decline and will have produced 80 Gb
by about 2010, when the water cut will have risen to 80%.

http://www.peakoil.net/Newsletter/NL41/newsletter41.pdf

[mulethree]

6. READ THAT LINK

be sure to read as far as section 353

oil prices going much higher, energy policy needs to be way up on our priorities list if not the very top. Look at all other policies with an eye towards 'how will this help when oil and gas are 3X as expensive'