Thursday, May 3, 2007

Saudi Arabia Just Blinked

In case you missed it, Saudi Arabia, oil producer extraordinaire, just blinked. The following was reported on 5/2/07 and was published in one form or another in the WSJ and on

“ Top world oil exporter Saudi Arabia said further expansion of its production capacity may not be needed beyond 2009 as consumers grow more energy efficient and switch to alternative fuels.

Saudi Oil Minister Ali al-Naimi said in September the drive to conserve fuel could slow investment by producer countries. His comments on Wednesday were the strongest signal yet of the need for evidence that demand growth would justify new supplies.
The kingdom is on track to meet an existing capacity target of 12.5 million barrels per day (bpd) by the end of 2009 -- up from 11.3 million now.

"Our feeling now with this thrust and push for conservation, efficiency and the use of alternatives is that we probably need not go beyond 12.5 million barrels per day," he said in Riyadh after a meeting of Middle East and Asian oil ministers.
"But that is just guessing right now because we don't really know what the effect ... will be on demand. For now our plan is to reach 12.5 million in 2009 and then watch the market for further signals."

Biofuels are the main alternative to oil for transport, but most projections suggest they will only satisfy a small proportion of motor fuel demand over the next decade.”

Go that? The Saudi Oil Minister says that Saudi Arabia will NOT INCREASE OIL PRODUCTION AFTER 2009. Forget the silly explanation – that alternative fuels, which currently provide, perhaps, a couple of percent of the world’s demand for liquid petroleum transportation fuels and which require fossil fuels as their energy input (ethanol plants run on coal and oil, go figure), and consumer conservation, will stop the increase in demand for oil that has been going on for nearly 100 years - HA!!!! Saudi Arabia just told the world that their oil production peak will happen sometime before 2010.

The remaining exporters, such as Mexico, the UK, Norway, Russia, Iran… are all experiencing significant export declines and the UK will go from exporter to importer this year or next, but the KING, Saudi Arabia, will not be needed to increase its oil production and hence its exports because of, get this, ethanol. You know, ethanol, the stuff that requires a Federal MANDATE and a SUBSIDY in the U.S. Market.

Did I mention that any “spare capacity” (pipe dream) that the Kingdom has is not Oil we can currently use because of its high sulfur and heavy metals content. If the Saudi’s “spare capacity” was usable they would sell it (3 billion bpd), we would buy it, and prices would be closer to $35 per barrel rather than $65.

They could have put a better spin on it, not that it matters.

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