Oil and the Saudis

By Ron Beasley

So the Saudis have said no to Bush's request to increase oil production.

President Bush used a private visit to King Abdullah’s ranch here on Friday to make another appeal for an increase in oil production that might give American consumers some relief at the gasoline pump. The Saudis responded by announcing they had decided a week ago on a modest increase of 300,000 barrels a day.

The White House said the increase would not be enough to lower gasoline prices, which are nearing $4 a gallon, and industry analysts called it mostly symbolic.

But Mr. Bush’s request — his second in five months — coupled with rising anti-Saudi sentiment in the Democratic-led Congress, underscored the growing tensions between the two countries over oil.

Of course it would be easy to say that this is just another example of how little influence George W. Bush has anywhere and that would be correct.  But there is more - the Saudis said there is not enough demand to increase production.  This too is correct, the current price increases are not so much a rise in the price of oil as the decrease in value of the dollar.  And yes the war that was supposed to reduce the price of oil is responsible. Borrowing three billion dollars a week to finance the occupation of Iraq is rapidly eroding the dollar.

But there may be another reason why the Saudis won't increase production - they can't.

Peak Oil for Saudi Arabia?

At yesterday's Peak Oil presentation to Hamilton City Council, Richard Gilbert mentioned a little-reported event that may mark the day that the earth tipped past its oil production peak.

Amazingly, a search of news reports turned up virtually nothing. I eventually tracked down the original report from Platts Oilgram News: Saudi Aramco announced on April 10, 2006 that Saudi Arabia's mature oilfields "are expected to decline at a gross average rate of 8 percent a year without additional maintenance and drilling."

The Aramco spokesperson explained that the company is attempting to offset those declines with "remedial activities" including drilling new wells in existing fields and opening up new fields.

But get this: the spokesperson went on, "This maintain potential drilling in mature fields combined with a multitude of remedial actions and the development of new fields, with long plateau lives, lowers the composite decline rate of producing fields to around 2 percent."

The last time I checked, a two percent decline is still a decline. If this is correct, then Saudi Arabia may be past its peak in oil production. Saudi Arabia is responsible for approximately one eighth of the world's oil; as Saudi Arabia goes, so goes the world.

For additional information on Peak Oil you can see a post I did over at Middle Earth Journal almost four years ago ; Oil, Half Way To Empty

Comments

[Kat]

Which news source to believe?...

The top business story at the London Times, May 17, 2008:
Saudis and US act to bring down oil price

Saudi Arabia agrees to pump out an extra 300,000 barrels per day while US stops shipments to its strategic oil reserve.

K

[pwapvt]

Why does the phrase 'outsourcing America's energy security' come to mind. How pathetic that we can't make the hard choices we need to to get off of oil.

[Bob]

Saudi's have to eat. Sand doesn't taste good and is difficult to cultivate for crops. Where do they get their food products? Food for oil bartering sounds good to me.

[Steve Hynd]

Bob, the Saudis are well aware of their problem and are in the middle of a drive to make themselves self-sufficient in many areas of food production such as fruit, dairy, halal poultry and dates. They increased domestic food production by 17% last year. Primarily their bulk imports come from Europe, especially the Netherlands (grain, halal meat and potatoes), other Arab nations like Egypt (grain, halal meat and rice) and Asia, especially Thailand (rice).

Regards, C