Where Now For Oil?

…Traditionally, Saudi Arabia has always helped out in times of crisis by increasing its production. However, some observers think that the country’s reserves are lower than the Saudis claim — over-production during previous crises may have damaged the quality of the wells.

Matthew Simmons, a Texan banker, expounded this argument in his book, Twilight In The Desert. Simmons also pointed out that no “great” Saudi oil fields have been discovered since the late-60s. On the other hand, plenty of people think that Simmons is completely wrong. It’s hard to know for sure as the Saudi government doesn’t provide much detail when it publishes reserve figures.

There are some other decent bear arguments out there too. For starters, recent price rises in Thailand appear to be reducing demand. Fresh oil is being discovered in the Caspian Sea and West Africa.

And if oil prices stay high, consumers and governments may make greater efforts to reduce their consumption. Alternative energy programmes may grow faster too. I also suspect that Chinese economic growth may take a breather at some point in the next few years. All booms overheat eventually.

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