Under huge political pressure, Saudi Arabia will raise oil production to record levels by pumping an extra half-a-million barrels of oil a day, bringing their production to 9.7 million barrels a day.
That would be a rise of 550,000 bpd or over 6 percent since May and would take Saudi crude output to its highest monthly rate since August 1981, according to U.S. Energy Information Administration data.
King Abdullah signalled the commitment to the UN secretary general, Ban Ki-moon. Mr Ban said: “He told me they will respond positively whenever there is a request for an increase in production. So there will be no shortage of oil.”
But as the Saudis pump oil at their fastest rate, this begs the question as to how long they can keep this up. This in turn is based on the question of how large their oil reserves are.
As a great leader in the Independent says: “It is often asserted that Saudis still have vast oil reserves. But there is no independently verified proof of this. We have no choice but to rely on what they choose to tell us. If the kingdom really thinks the present price is the result of a speculative bubble driven by misinformation about its reserves, it ought to open up its oilfields to independent inspection to dispel the doubts. Of course it will not do this.”
It continues “What we are seeing in this desperate horse-trading is the endgame of the oil age. Even if we have not yet reached the inevitable moment of “peak oil”, when production begins its inexorable decline, it is abundantly clear that the age of cheap fuel is over … That is the central fact that governments ought to be addressing. It is ridiculous for the Saudis to attempt to tell Western governments how they ought to tax fuel sales, just as it is ridiculous for Western governments to tell Saudi Arabia and other oil producers how much they ought to pump out of the ground. The debate ought to be about how best to break our economic dependence on oil.”
It ends: “Governments should recognise the pain being endured by drivers and businesses at the petrol pumps. But their response should not be to tell their electorates that hectoring the Saudis will bring down the price of fuel, or to mess around with short-term gestures such as suspending taxation. Instead, it should be to announce that funds from higher fuel taxes will be channelled into alternative, clean power generation and energy conservation schemes. The fact that so many of our political leaders are pinning their hopes on the oil producers riding to the rescue merely confirms how tenuously they grasp the new reality.”