Top oil exporter Saudi Arabia needs to pump at least 9 million barrels per day (bpd) of crude for the next few years and is considering boosting capacity to meet rising demand, Petroleum Intelligence Weekly (PIW) said in a report citing Saudi sources this week.
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Saudi Oil Minister Ali al-Naimi said on Sunday the kingdom's April oil output may rise from March, when it pumped 8.292 million bpd. Output was above 9 million bpd as recently as February, when the kingdom produced 9.125 million bpd to plug the gap left by Libya, where civil war cut exports.
Libyan output disruption, the threat of more supply cuts stemming from political tumult across the Middle East and North Africa, and strong growth in fuel demand helped push oil prices to 2.5-year highs this year. Brent crude rose to $127.02 a barrel earlier this month, the highest since August 2008, while U.S. crude rose to $113.46.
It sounds to me more like the House of Saud sees an opportunity for enormous profits.
And therein lies the tale.
You may recall that, yesterday, I briefly discussed the looming cold war between the Saudis and Iranians. The Saudis have been stockpiling weapons. While there is no question this has been a drain on the coffers of the King, undoubtedly a few days worth of profit has probably paid many times over for the armaments.
But...there's a flip side. Another thing to consider when looking at this cold war is the unmistakable stench of American policy and hegemony. It is not unlikely, now that Obama has genuflected in the directions of the Saudis, right down to toning down his criticism of Israeli cross-border aggression against the Shi'ite-backed Lebanese and Palestinians (Shi'ite, in this case, being Syria and Iran), that there's a tit-for-tat deal working here, where Obama gets to influence Saudi oil pumping decisions.
Remember that cold war: who's supplying the Saudis with weapons if not us? Well, I mean, us, France and Britain, of course. The Sauds are the seventh largest buyer of armaments in the world. There's a lot of money to be made there, much of which filters its way back to the US.
It is, in effect, an enormous transfer of wealth from the working and middle classes at the gas pump, back up to the rich and elite who supply the weapons technology, many but not all of whom also maintain a vested interest in higher energy prices.
Which means the Sauds have to walk a tightrope in terms of the strike price on their oil deliveries. Too low, and they'll piss off the speculators. Too high, and they'll piss off the adminstration and defense contractors.
So if they can bank a high profit margin at the same time, then things are golden for them.
Need? No. Greed, is more like it.
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