Peak Oil

Saudi Arabia: No More Oil for You

By Ryan McGreal
Published April 21, 2008

Saudi Arabia has the world's largest conventional oil reserves and single-handedly produces close to ten million barrels a day. For the past several years, Saudi Arabia has claimed it can increase its oil production still further to meet growing demand.

No so, say many observers. Saudi Arabia keeps a close lid on its oil production capability (managed by state-owned Saudi Aramco), but the most exhaustive external study of the kindgom's reserve situation, by oil investment banker Matthew Simmons, concluded that the country is past its oil production peak and cannot maintain even its current rate of production, let alone increasing it.

A small report in Platts Oilgram News in April 2006 seemed to confirm this assertion, and a year later, Saudi Arabia's oil production was down eight percent.

Through all this, Saudi Arabia has maintained that it still plans to invest in raising capacity and was merely reacting to market forces (!?) by reducing its oil output.

A new report in the Financial Times blows this pretense out of the water:

Saudi Arabia, the world's biggest oil producer, has put on hold any plans to further increase long-term production capacity from its vast oil fields, its most powerful policymakers have said.

In a series of statements, including one by the king himself, the kingdom has warned consumers it does not believe there is a need for further expansion, an assumption disputed by the world's biggest developed countries.

Translation: Saudi Arabia cannot increasse its long-term production capacity and is attempting to save face by suggesting market trends don't indicate a need to invest billions of dollars in new capacity.

The article make the obvious point that without the additional oil production the kingdom has spent the past half-decade promising, oil prices - already record-breaking - will likely rise further.

Ryan McGreal, the editor of Raise the Hammer, lives in Hamilton with his family and works as a programmer, writer and consultant. Ryan volunteers with Hamilton Light Rail, a citizen group dedicated to bringing light rail transit to Hamilton. Ryan writes a city affairs column in Hamilton Magazine, and several of his articles have been published in the Hamilton Spectator. He also maintains a personal website and has been known to post passing thoughts on Twitter @RyanMcGreal. Recently, he took the plunge and finally joined Facebook.

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By Oiler (anonymous) | Posted April 25, 2008 at 15:51:06

CIBC World Markets seems to have noticed. They're saying oil prices will double again in the next five year!

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By David (anonymous) | Posted April 25, 2008 at 16:28:23

Actually, only 4 years for oil to double. The report today said $150/bl by 2010, and $225/bl by 2012. But given the speed with which we went from $100 to $120, I'd say even that schedule is optimistic. It has a lot to do with how fast the value of the US Dollar continues to fall, in combination with demand outstripping supply. But their is a major third influence, which we are likely to see if Bush begins bombing Iran.

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