Saudi Oil, OPEC’s Ire

Saudi King Abdullah wants to bring prices down to ensure long-term demand, but other OPEC ministers disagree

The Saudis have long memories and recall how high prices can cut into consumption; it happened in the 1980s and it’s happening again now. Any threat to oil’s leading role as a source of energy is a big worry for a country that sits on reserves of some 260 billion barrels. “We are concerned about the permanent destruction of demand,” says a senior Saudi official. “Those who buy hybrid vehicles are not going back to SUVs.”
OPEC hardliners such as Iran and Venezuela, by contrast, have less oil in the ground and are running short on cash, so they’re more interested in maximizing revenues today. Friction within OPEC has been growing because Saudi Arabia has been pumping almost 10% more than its OPEC quota of 8.9 million barrels per day. The Saudis and other Persian Gulf states believe a price of $90 per barrel is about right, while the hardliners don’t want to see anything less than $100 per barrel. “The current market is not balanced; it is oversupplied,” Iranian OPEC representative Mohammad Ali Khatibi told Reuters.

Talk to the Saudis privately and they often express frustration with OPEC. Saudi negotiators complain that some members come to meetings with rigid political positions that don’t take the real world into consideration. And the Saudis dismiss the likes of Venezuela and Iran for talking big without having the oil to back it up. Venezuela can’t produce its quota of 2.5 million barrels per day, while Iran struggles to pump its 3.8 million. Only the Saudis have significant unused capacity that they can tap to influence the markets, and they are working to add to this margin

Business Week