The Saudis control the price of oil. They have been targeting successfully a price band of between $70 and $80/barrell for years
That is merely a claim. In 2004 they were targeting $30-40. What has changed is that they are no longer able to dial their production up as much as they want like in the 1980s and 1990s. Where is there any evidence for the spare Saudi capacity? Demand from China, India and other parts of the world is what is keeping the prices high in the worst recession since the Great Depression and not some mythical Saudi power over the market.
Saudi Arabia was essentially out of the picture before petroleum went above $80 in 2008. Previously SA was
the "swing state," and merely had to hint at increasing capacity, twist production dial a bit, and prices would come down. That changed in 2005, when Saudi oil production peaked. It would behoove everyone here at PO.com to read, re-read, and study Westexas (from the TheOildrum). His following short analysis is as concise and true a history of peak oil
as you are going to read. (his bolds)
Westexas wrote:[new]westexas on July 18, 2010 - 5:27am Permalink | Subthread | Parent | Parent subthread | Comments top
IMO, the Saudis' net export response to rising oil prices from 2005 to 2008, versus their net export response to rising oil prices from 2002 to 2005, is very significant, but the myth of non-depleting oil fields in Saudi Arabia is quite persistent.
Regarding new production that Saudi Arabia is bringing online, it's useful to remember the North Sea case history. The North Sea peaked in 1999, but Sam Foucher looked at the fields whose first full year of production was in 1999, or later. These "Post-Peak" fields had a peak of about one mbpd in 2005, compared to a total peak of about 6 mbpd in 1999, but the post-peak fields only served to slow the overall decline rate to about 4.5%/year.
Saudi Cumulative Net Oil Exports Versus US Oil Prices
2002-2005 & 2005-2008 (EIA, Total Liquids)
One of the primary contributors to the 2002-2005 increase in global crude production, followed by the 2006-2008 decline was Saudi Arabia, but let’s look at Saudi net oil exports, which are defined in terms of total liquids, inclusive of natural gas liquids and refined products.
Here are the average Saudi net oil export numbers per day by year, versus average annual US spot crude oil prices:
2002: 7.1 mbpd & $26
2003: 8.3 mbpd & $31
2004: 8.6 mbpd & $42
2005: 9.1 mbpd & $57
2006: 8.4 mbpd & $66
2007: 8.0 mbpd & $72
2008: 8.4 mbpd & $100
Relative to the 2002 net export rate of 7.1 mbpd, in the following three period, 2003-2005 inclusive, the cumulative three year increase in net exports was 1,716 mb, versus a three year increase in oil prices of $31. dollar, again relative to the 2002 rate.
But then we have the 2006-2008 data.
Relative to the 2005 net export rate of 9.1 mbpd, in the following three year period, 2006-2008 inclusive, the cumulative three year decline in net oil exports was 841 mb, versus a three increase in oil prices of $43.
Note that in early 2004, the Saudis reiterated their support for the stated OPEC policy of maintaining an oil price band of $22 to $28, and they made good on their promises to support lower prices as they significantly increased net oil exports in the 2003-2005 time frame, but then in early 2006, they started complaining about problems finding buyers for all of their oil, “Even their light/sweet oil,” even as oil prices continued to increase. Apparently no one thought to ask them in early 2006, as oil prices traded over $60 per barrel, why they didn’t offer to sell another two mbpd of oil for $28 per barrel.
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The Saudi Royal Family is now retrenching, promising its restive young angry population to "save petroleum for future generations" etc. because it no longer has the historic production/pricing power to maintain economic stability in the developed world and thus protect it hegemony at home.