Saudi King rebuffs Bush: No cheap oil

Buy an ad on DigitalJournal.com

In a response that should surprise no one who has even a cracked crystal ball, the Saudis refused to greatly increase their oil production in response to the begging of G.W. Bush.

With the price of oil hitting record highs, President Bush used a private visit to King Abdullah’s ranch near Riyadh on Friday to make a second attempt to persuade the Saudi government to increase oil production.

Saudi King Abdullah explained that Saudi Arabia had already increased its production by 300,000 barrels per day, and that it would not do any more. The King coolly declared:
“If you want more oil you need to buy it.”

The 300,000 barrel increase will not push Saudi production back up towards its peak production of three years ago. Saudi oil output has declined in the last three years, and looks like:

2005 9.55 mbpd (million barrels per day)
2006 9.15 mbpd
2007 8.72 mbpd

Adding 300,000 barrels to the last number only raises Saudi production back up to 9.02 million barrels per day.

The real question here, which nobody is asking is: "Can the Saudis actually increase their production?" The Saudi oil fields have been producing heavily since the 1950s, and are approaching depletion. Current reports state that Saudi Aramco (the Saudi oil company) is getting a 60 or 65% water cut from their wells. That means that the wells are producing more sea water than oil now. That is a sure sign that their oil fields are on their last legs.

It is likely that the Iranians are having the same problem. Three days ago, they threatened to cut oil production. Is that really a voluntary reduction, or are they having troubles producing oil, and covering up their weakness by pretending that they choose to cut production?

For more information on Bush and the King, see this link.

And in response to the King's statements, the price of light sweet crude oil went back up to $126 and change per barrel.