Almost a year ago, on a tip from Richard Gilbert, RTH picked up on a mostly-ignored report in Platts Oilgram News that Saudi Arabia was past its oil production peak.
Today, over at The Oil Drum, Stuart Staniford reports that Saudi Arabian oil production dropped eight percent last year.
Saudi Oil production, Jan 2006 - Jan 2007 (Source: The Oil Drum)
Some commentators - including most peak oil deniers - are arguing that OPEC's oil production dropped last year because they want to maintain high prices.
However, this flies in the face of OPEC's longstanding policy, which is to keep oil trading in the $20-35 dollar range - high enough to be profitable, low enough to price non-conventional oil out of the market, and moderate enough to encourage steady consumption growth of around two percent a year.
We learned reecently that oil production has been stalled at 84 million barrels a day for the past two years, and many buyers, especially in less developed countries, are simply being priced out of the market as sustained high prices destroy market demand.
We are certainly being lied to about Saudi Arabia's oil reserves - and the reserves of every other OPEC country as well. In the 1980s, when OPEC changed its rules so that countries could only export oil based on their reserves, every country's reserve estimates jumped.
In January 2006, a leaked internal memo found that Kuwait's oil reserves were only around 50 billion barrels instead of the 100 billion the Kuwaiti Oil Company had been claiming.
Similarly, we are being lied to about Saudi Arabia's continued ability to crank out millions of barrels a day. Saudi Aramco has been pumping seven million barrels of saltwater a day into its massive Ghawar field just to keep production flat, and the water cut is a significant, and growing, share of the total output.
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