Sunday, June 22, 2008

Saudi Arabia hosts meeting on oil prices, considerable increase in production seems likely

Multiple media stories now report that Saudi Arabia has promised to increase oil output in a meeting today (Sunday). Other stories report that the oil ministers say that Saudi Arabia “can” increase production. Perhaps the analytic character of our own English language matters here.

The AP story is by Sebastian Abbot with a link here. The report does not specify an amount. However, various comments in the media suggest an increase of 1 to 2 million barrels a day, which could amount to up to a 20% increase starting in July.

It is not clear how this would affect oil prices Monday, in view of other news, and in view of theories that Arabia could become “tapped out.” It is also not clear how it would affect oil company share prices. It could drive them down for a while, tempting more investors to buy. That could be a good thing if the oil companies are allowed to do more domestic off-shore and Canadian drilling, given the long term outlook for demand.

Reuters has a story by Simon Webb and Summer Said, “Jeddah starts oil price dialogue, but no quick fix.” The story discusses a Saudi promise for loans to help developing countries deal with high oil prices. The link is here.

The other big question is this: If Saudi Arabia markedly increases production (as it did in the 1980s under Reagan's policies and seems willing to do so now out of fear of "demand destruction") will the West really get serious about developing politically secure sources of oil, particularly in North America, where you need $100 a barrel to get it out with a profit?

Picture (across street): Islamic Saudi Academy, south of Alexandria VA, a grade, middle and high school funded by the Saudi government, subject of some controversy in local news stories this spring.

Note: Reports on CNN later on Sunday indicate that Saudi Arabia has promised to increase production from 9.0 million to 9.7 million barrels a day, an increase of about 8%.

1 comment:

Mike Brady said...

There is a very clear conflict between addressing climate change and calling for more oil to be pumped to keep down prices that might otherwise make renewable fuels more attractive.

But it is because of the conflict politicians find themselves in and once again demonstrates the need for simultaneous action on climate change, peak oil and other global issues.

The Simultaneous Policy campaign brings people together around the world to discuss, develop and ultimately approve the policies they wish to see implemented.

For comments on Gordon Brown's recent lobbying of oil producers see: