The Saudi Oil Minister said yesterday that the Kingdom had slashed oil output by 800,000 barrels per day in March due to oversupply. Oil Ministers from Kuwait and the UAE likewise announced their concerns about an oversupply, and this is a signal that OPEC will not be talking about increasing supplies until it meets again in June.
Crude is currently at $127 per barrel.
The Saudis and the other Arab oil producing members of OPEC are rightly concerned about oversupply since increasing prices have led to decreased demand, and they have a number of other practical reasons for keeping supplies down and preserving prices.
The Arab world has been inundated with protests and unrest, which has involved the Sunni autocracies in the Persian Gulf spending money on subsidies to keep things quiet. The Saudis, for instance, have promised nearly $93 billion in handouts to their citizens.
Another factor is increased spending on armaments, particularly by the Saudis, as Iran becomes increasingly more militant and domineering and the Saudis and others in the region realize that the Obama Administration is essentially unserious about curbing the Iranian Shi'ite threat. The Saudis are already spending money to defeat Iranian-backed insurgencies in Bahrein and Yemen, and the last thing they can afford right now is a sharp fall in oil prices.
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3 comments:
All the people around the world must cut their needs means they try to go their offices by bus or by bike then so much of fuel will be saved and if they used electric cars and electric
Prasad,
What we really need is more production, not less consumption. Its not right to ask people to sacrifice their well being based upon someone else's bad decisons.
Now with that said steep cuts in useage may be required in the short to mid term, say for five to ten years or so. This is probably about how long it will take to get enough of our domestic production online and to build enough refineries to meet all of our needs without importing from anyone.
Had the politcal powers that be listened to me after the 911 attacks, we would have immediately began to access all of our own domestic sources and build many more refineries. Had we done this we would have all of the oil we need and we could have deprived our enemies of a major source of funding for their operations against us. We would have gotten much more utility for our national defense needs and done much more to advance our interests by taking these simple steps than any thing we are currently doing or have done has netted us.
This would have had an additional benefit to us and the world given the current geopolitical situaion in the middle east. Much of what is driving the current price of oil to such high levels is the risk of instability in this valuable region. If our supplies were on line, we could offer a stable alternative and we would be able to easily make up for any short fall. Alas, they didn't listen to me.
I would love to see Iranians bombing Pakistan & al-Saud
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