Saudi Fears Of High Oil Prices Fade With Demand

HOUSTON (Dow Jones)–For all the benefits of soaring oil prices, Saudi Arabia has historically viewed them with a measure of trepidation.

Besides the worry that high energy prices could hinder economic growth and eat into demand, Saudi officials have traditionally argued that sky-high crude prices would hasten the development of renewable energy that would displace petroleum.

But as oil prices have crept up in recent years, from the $20 a barrel range early in the decade to Monday’s record above $120 a barrel, the kingdom has repeatedly used its clout within the Organization of Petroleum Exporting Countries to sanction an ever-higher price deck. At the same time, while Saudi Arabia’s powerful Oil Minister Ali Naimi has at times emphasized price moderation, he hasn’t been as vocal as some predecessors on the worry that high prices threaten the long-term viability of Saudi Arabia’s core asset.

Interpreting Saudi Arabia’s strategy is challenging, in part because Naimi and other top petroleum officials don’t often speak publicly and choose their words carefully when they do. Saudi oil ministry officials declined to comment for this article.

Still, some leading energy and Middle East experts perceive a Saudi shift towards greater acceptance of high prices amid surging demand from China and other developing economies. Next to these new sources of demand there is diminished concern about high prices creating greater incentives for competing sources of energy.

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