April 26, 2005
-- by Dave Johnson
Saudi Arabia's plan, which it began discussing publicly weeks ago, calls for spending up to $50 billion to increase its maximum sustainable production capacity to 12.5 million barrels a day by 2009, and to 15 million in the subsequent decade, from about 10.8 million barrels now. The Saudis are currently pumping about 9.5 million barrels a day.Think about it this way: Who GETS that $50 billion to be spent on upgrading facilities? And who's worst enemy (and oil competitor) was invaded and occupied recently? And who's military and intelligence services are protecting which kingdom?
A Saudi official said that Mr. Bush had not requested a short-term production increase and that such an increase would not have any effect on gasoline prices in the United States in any case. The high price of gasoline in the United States, the Saudi official said, was mostly a result of a lack of refining capacity here.Uh huh. The same refining capacity that had us under $2 recently.
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Note that there wasn't a contract or treaty signed to guarantee these things. It was all hot air.
The silly thing about this story is that the Saudis don't have a ghost of a chance of increasing their oil production 40 or 50%. Ghawar, the Saudis largest field, is dying- production from this site is going to end over the next few years. After it goes, at best all the Saudis can do is to keep their production steady for another decade or so.
Keep in mind that there is NO independent account of Saudi, or any other OPEC nation's, reserves. The Saudi's *claim* to have huge un-tapped reserves, but nothing in their _conduct_ over the past 20 years backs these claims up. Recall also that the financial structure of OPEC makes it highly profitable for these nations to exaggerate their holdings.
Yes, the Saudis will *agree* to do these things. Yet somehow, despite all the soothing words, nothing real will happen- just like last time.
Think also about the amount of money being discussed- "up to" $50 Billion, over 15 years. That's "up to" $3.33 Billion per year- certainly not enough to build several new pipelines and refineries, and thousands of wells at a price of many millions each- all of which would be required to boost production by 40-50% in the face of the death of Ghawar. Most probably the $50 Billion is money already bugeted for normal expenditures such as maintaining current production facilities and pipelines, and for opening up new wells and (smaller, less profitable) fields they were already planning to develop anyway.
Anyone wanting a pretty quick education on oil can go into Edgar and look at what the big oil companies have *really* been doing with their money for the past ten years. No need to take any gullible reporter's word for it.
Posted by: Anonymous at April 26, 2005 3:24 PM
Posted by: grannyinsanity at April 26, 2005 5:06 PM
Every so often, Alan Greenspan takes a breath between pushing for more debt and calling for the wholesaling of our country to reassure us that the free market wil take care of the escalating gasoline prices.
Don't you feel better now?
Posted by: grannyinsanity at April 26, 2005 5:10 PM
... EDGAR: one of those nasty government imposed regulatory requirements placed upon our nation's upstanding public companies, who would never ever leave their shareholders in the dark without it. :)
All companies, foreign and domestic, are required to file registration statements, periodic reports, and other forms electronically through EDGAR. Anyone can access and download this information for free. Here you'll find links to a complete list of filings available through EDGAR and instructions for searching the EDGAR database.
Posted by: Thomas Leavitt at April 26, 2005 7:00 PM
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