Next stop, $200?
Saudi Oil Minister Ali al-Naimi said that Saudi Arabia will increase current production to record levels and total capacity to 15 mbpd. Given the trends in the recent past, we wouldn’t be surprised if these increases in oil supply send prices to $200 a barrel. AP via WSJ:
For the remainder of the year “Saudi Arabia is willing to produce additional barrels of crude oil above and beyond the 9.7 million barrels per day which we plan to produce during the month of July, if demand for such quantities materializes and our customers tell us they are needed,” Mr. Naimi said in the speech…
The conference’s final statement restated the participants’ concern over volatile oil prices, but attempted to strike a balance over the cause. Producers, like Saudi Arabia say it is due to speculation, while the U.S. maintains it is due to insufficient supply.
“Spare capacity throughout the oil supply chain is important for the stability of the global oil market,” said the statement, which also noted that “the transparency and regulation of financial markets should be improved.”…
Mr. Naimi also said that the kingdom was willing to invest to boost its spare oil production capacity above the current 12.5 million barrels per day planned for the end of 2009, reversing previous statements that the country would not go beyond that figure.
“In addition, we have identified a series of future crude oil mega-increments totaling another 2.5 million barrels per day of capacity that could be built if and when crude oil demand levels warrant their development,” he said. (Bloomberg: “The further daily capacity includes 900,000 barrels from the Zuluf field, 700,000 barrels from Safaniyah, 300,000 barrels from Berri, 300,000 barrels from Khurais and 250,000 barrels from Shaybah, Naimi said.)
Also from Bloomberg: Venezuelan Oil Minister Rafael Ramirez, also asked whether the oil price was likely to fall after the Saudi move, said: “I don’t think so because it’s not a problem of supply.” What a world it is when the Venezuelan oil minister just might be right.
June 22nd, 2008 at 4:53 pm
Also from Bloomberg: Venezuelan Oil Minister Rafael Ramirez, also asked whether the oil price was likely to fall after the Saudi move, said: “I don’t think so because it’s not a problem of supply.” What a world it is when the Venezuelan oil minister just might be right.
Obama has released his plan to curb energy speculation. Oil executives are designated as “independent experts” when their views support Obama’s. On the agenda:
A conscientious regulator’s job is difficult because there are legitimate interests pro and con any change in the degree of regulation; moreover, there is a plenitude of domestic and foreign wise guys waiting to pounce on any regulatory misstep. In my inexpert opinion, inadequately regulated markets tend to become rigged or manipulated; in a globalized economy, over-regulated markets tend to move offshore (as IPOs have done because of Sarbanes-Oxley).
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The regulatory measures are part of Obama’s “comprehensive plan to make America a global energy leader”, but I gather that the ‘comprehensiveness’ does not involve drilling.
Plan A is to regulate and tax. Is Plan B, currently not openly spoken of, to ration? Plan C, to nationalize?
June 23rd, 2008 at 12:28 pm
The people who want to sue OPEC are also proposing regulations. From Rep. Bart Stupak, D-Mich.:
As I read that paragraph, Stupak is asserting jurisdiction over every single oil transaction in the world.
And if the rest of the world ignores us? Well, we’ll just stop buying their oil. That’ll show them.
Instead of ignoring us, they might make us a low-priority customer. The American price of oil would thereby become greater than the international price. Accordingly, there would be no reason to express the international price in dollars.
Opponents of domestic drilling say that it would take ten years for the new oil to come online. (How long would it take other modes of energy?) It would take much less than ten years to make a difficult situation worse.