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Page added on October 22, 2018
Saudi Arabia Has No Plans to Repeat 1973 Oil Crisis
Saudi Arabia has no intention of using its oil wealth as a political tool in the controversy over the killing of journalist Jamal Khashoggi, and the kingdom plans to boost crude output again soon.
“For decades we used our oil policy as a responsible economic tool and isolated it from politics,” Energy Minister Khalid Al-Falih said in an interview with Russia’s TASS news agency published on Monday. “So let’s hope that the world would deal with the political crisis, including the one with a Saudi citizen in Turkey, with wisdom,” he said.
Falih’s comments come just days after Saudi Arabia said Khashoggi, a critic of Crown Prince Mohammed bin Salman, was killed in the country’s consulate in Istanbul. While the official report won praise from U.S. President Donald Trump, many politicians and leaders in America and Europe questioned the official explanation that he was accidentally killed in an altercation. That contradicts details leaked by Turkish officials saying the journalist was murdered.
The incident has damaged the kingdom’s image as a future investment hub, with global business leaders from Goldman Sachs Group Inc. to Uber Technologies Inc. distancing themselves from Prince Mohammed and scrapping plans to attend his business forum this week.
Production Promise
Last week, Saudi Arabia vowed to retaliate against any punitive measures linked to Khashoggi’s fate, fueling concerns of oil price hikes. Al-Falih said there’s no intention of repeating the 1973 oil embargo, in which the kingdom and several regional allies squeezed supplies to the U.S. and Europe in retaliation for their support for Israel.
Saudi Arabia is ready to raise its output to 11 million barrels a day “in the near future” and has the ability to lift production as high as 12 million barrels a day if the market requires it, Al-Falih said. The world needs to show its appreciation of the efforts and multi-billion dollar Saudi investment that made this possible, he added.
There are limits to the kingdom’s ability to respond, Al-Falih said. If the supply gap created by disruption in Libya, Nigeria, Venezuela — as well as U.S. sanctions against Iran — were to grow as large as 3 million barrels a day, Saudi Arabia would need to tap its oil reserves, he said.
Joint work between the Organization of Petroleum Exporting Countries and non-OPEC oil producers needs to continue on a long-term basis, Al-Falih said. He expects the cooperation agreement, initially signed in late 2016, to be extended in December, at a meeting in Vienna. The deal “will allow us to intervene to rebalance the market in any appropriate time from January onward”, he said.
After agreeing in late 2016 to cut production to eliminate a supply glut and boost prices, many OPEC members and allies including Russia are now increasing output to offset disruptions in Venezuela and Iran. It’s still too early to say what strategy the group will adopt in 2019 given current uncertainties, said Al-Falih.
“If the supply is too long, we should be able to cut,” Al-Falih said. “If supply is short, we have to be able to respond.”
2 Comments on "Saudi Arabia Has No Plans to Repeat 1973 Oil Crisis"
Antius on Mon, 22nd Oct 2018 5:13 pm
As most here will know, I am a strong proponent of nuclear fission as mankind’s most promising replacement for fossil fuels. However, this solution does not suit everyone and as an engineer, I relish the challenge of finding solutions that allow other clean energy sources to displace fossil fuels.
The economics of renewable energy sources often looks quite reasonable at the busbar. The problem is that human beings have grown accustomed to having energy on demand, in any quantity at any time they feel like. Attempting to meet that requirement using renewable energy is a tough challenge, because it requires storing energy in some way, which involves huge additional capital costs and inevitably wastes energy in losses and in the embodied energy within the store.
The best solution to this problem is to find ways of adapting our demand to match supply, so far as possible, with limited storage being used to allow important operations to be finished. For example, some 90% of the energy used by a washing machine is heat in the form of hot water, that can be stored cheaply, and about 200 watt-hours of electric power. However, much of the small amount of electric energy that is used is consumed in the spin cycle, requiring over 1kW of power for just 5-10 minutes.
One method of energy storage that could be cheap and efficient, is low pressure compressed air, I.e. <1bar. Air at this pressure can be stored in polyethylene lined pits, with the excavated material used to counter weight a concrete cover against internal pressure. Air at a pressure of 0.5bar can be counterweighted by a mass of 5 tonnes per square metre. Given the density of subsoil being 2 tonnes per cubic metre, a pit 2.5 metres deep will produce enough excavated material to form a counter weight over a concrete lid.
Air at 50KPa will store 60KJ per cubic metre. So storing 1KWh would require a pit with total volume of 60m3. But the store requires only digging for its manufacture and once built, should last indefinitely, whereas a deep cycle battery will be dead after 1000 charge cycles. In situations where wind and solar power are used to run high power equipment like machine tools, a compressed air store allows a small but relatively steady energy supply to power machinery that greatly exceeds its rated generating capacity. Of course, one must weight for the air store to recharge between uses.
Sissyfuss on Mon, 22nd Oct 2018 10:22 pm
Antius, how ever you cut it you’re talking about a much lower standard of living. Something our first world state of mind refuses to grasp.