The ‘Super Spike’ in Oil Prices – Implications for the U.S. & Saudi Arabia

[NVMojo]

August 24, 2005
Inquiry and Analysis Series - No. 236

The recent spike in prices at the pump has been "shock and awe" for the American driver – a situation occupying the front pages of major dailies and many minutes of airtime on television news programs. In one year, the price of oil has risen by 52 percent. Drivers who paid $25 to fill their tanks a year ago now pay $50 and more. No relief is in sight. OPEC members (Oil Producing and Exporting Countries) are already producing at full capacity, and OPEC's figures show that the 10 member countries, excluding Iraq, are currently producing 30,255 million barrels of crude oil daily. <1> With the exception of Saudi Arabia, none of the cartel members currently has surplus capacity. <2>

Given that global oil demand is projected to rise by 1.5 million b/d in the next two years, oil producers –both OPEC and non-OPEC members – will be hard pressed to meet the challenge. Meanwhile, neither the U.S. nor China, the two largest consumers of crude oil, is showing a diminishing need for this commodity.

Since the December 1998 collapse to under $10 per barrel – the lowest oil price since before the 1973 Arab oil embargo – oil prices have rebounded strongly. The OPEC "basket" price (a weighted average of Algerian Saharan Blend, Indonesia's Minas, Nigeria's Bonny Light, Saudi Arabia's Arabian Light, Dubai's Fateh, Venezuela's Tia Juana, and Mexico's Isthmus) averaged about $36 per barrel during 2004, nearly triple its 1998 level. <3>

More than half the world's oil reserves are in Saudi Arabia, Iran, Iraq, Kuwait and the United Arab Emirates. It is possible that Iraq has crude oil reserves equal to or higher than those of Saudi Arabia, but the Iraqi oil reserves have not been fully explored.

more...

http://memri.org/bin/articles.cgi?Page=archives&Area=ia&ID=IA23605

how informative ...

"Clearly, even the smallest interruption in the flow of oil in any of the oil producing countries, and especially in Saudi Arabia, could send shock waves into the oil market that would result in Goldman Sachs's forecast of a $105-per-barrel nightmare becoming reality. Indeed, interruption of supplies from any of the other major suppliers of crude oil to the United States – e.g., Mexico, Venezuela, Nigeria, United Arab Emirates or Angola – could have similar effects."

[Warren Stupidity]

1. Tell me again what our mission is in Iraq?

Let me hear the latest fairy tale about why we are there. Nothing to do with oil, right?

[yurbud]

2. We're there to piss off Arabs so they are less inclined to give us a break

[hadrons]

3. ".... but the Iraqi oil reserves have not been fully explored"

I'm sure those fields are in terrible shape too and probably not as much recoverable oil as the neo-knuckleheads believe there is