Saudi officials seek to temper the price of oil

Saudi Arabia, which benefited immensely from record oil prices last year, has sent signals in the past two weeks that it is committed to keeping oil at around $50 a barrel — down $27 a barrel from the summer peak that shook consumers across the developed world.

The Saudis appear to be rediscovering that painfully high energy prices take a profound toll on the global economy, which in turn reduces demand for their oil. But other motives seem to be at work, too, including the Saudis’ desire to restrain Iran’s ambitions in the region.
“It is difficult to work out what the Saudis really want, since they never say things explicitly,” said Leo Drollas, the chief economist at the Center for Global Energy Studies, a London-based research group founded by Sheik Ahmed Zaki Yamani, a former Saudi oil minister. Sometimes, he said, “you have to read between the lines.”

The Saudi government does not disclose what oil price it uses when it builds its budget, but analysts at Samba Financial Group, a bank in Saudi Arabia, say they believe the price is $42 a barrel for 2007, with oil production at about 9 million barrels a day. With oil averaging $66 a barrel last year, the kingdom recorded a budget surplus of nearly $71 billion, Samba said, five times more than in 2005.

International Herald Tribune