Saudi’s Oil Promises

I contacted Youssef Ibrahim, who covered OPEC at the Wall Street Journal when I was there also covering oil and gas issues many years ago. He takes a critical view of Saudi production policies, and says that’s more important than physical capacity. Here’s what he said to me by e-mail today:

“Saudi Arabia periodically asserts it is planning to increase production which, over the past years, has proven to be more promise than plan. Very little money has been invested in developing infrastructure for more oil certainly in proportion to the vast new income in the past three years from higher prices.
“Still, as it stands, Saudi Arabia does have incremental capacity now to boost output by anywhere from a million to 1.5 barrels a day, which they also have chosen not to do. What it has proposed is a meager 200,000 barrels a day, not enough to soften prices nor demand.

“The fundamental philosophy of the Saudi oil establishment is that of OPEC, which is to maximize prices not output. This sometimes contradicts the political will, but in Saudi Arabia the oil establishment has time and again proven to be far more assertive.”

Washington Post