Saudi Arabia, the world’s biggest oil exporter, is planning to increase its output next month by about a half-million barrels a day, according to analysts and oil traders who have been briefed by Saudi officials.
The increase could bring Saudi output to a production level of 10 million barrels a day, which, if sustained, would be the kingdom’s highest ever. The move was seen as a sign that the Saudis are becoming increasingly nervous about both the political and economic effect of high oil prices. In recent weeks, soaring fuel costs have incited demonstrations and protests from Italy to Indonesia.
Saudi Arabia is currently pumping 9.45 million barrels a day, which is an increase of about 300,000 barrels from last month.
While they are reaping record profits, the Saudis are concerned that today’s record prices might eventually damp economic growth and lead to lower oil demand, as is already happening in the United States and other developed countries. The current prices are also making alternative fuels more viable, threatening the long-term prospects of the oil-based economy.
They can see the incoming, long term problems. People are dropping their SUV's and buying smaller, cheaper cars. Hybrids can't be kept in the showroom. Honda, Toyota, Chevy, Nissan, and a host of other auto manufacturers are talking about putting plug in hybrids on the market by 2010. Such cars would not require NEARLY as much gas as a normal car, and some owners wouldn't need gas at all. That makes it very problematic for Saudi Arabia. If there's no demand, the Saudi economy dries up as well. That means that they'd rather make $100 a barrel, and have people grumbling, then $140 a barrel, and have people looking at alternatives.
I don't think Saudi Arabia can control prices as much as they'd like to think. I just can't see this news taking the price of oil from $140 to say $60 where it was a year ago. I think this, coupled with the OPEC shortage of the 70's, has finally put a fire under the asses of car manufacturers, as well as car buyers. I also believe that we're in a "bubble" just like I believed we were in a housing bubble a few years ago.
For example, my home, when I bought it, was $229,000 for a standard 4 bedroom, 2,200 square foot home. Within a year, it had jumped to $350,000. I was tempted to sell it, move into an apartment, and wait for the bubble to pop, and use the extra $130,000 in equity to buy another home when prices fell. Well it took 3 years for the bubble to pop. I think this is similar to what we're seeing now. Oil has shot up because of the falling dollar. Congress can't seem to keep a balanced budget, spends money on crazy things like a fucking mule museum, and that effects the economy. So, analysts put their money into commodities, driving up "demand", and making oil significantly more expensive then it already is.
I think if car manufacturers, especially Toyota, come out with plug in hybrids that get a decent amount of travel on electric power only, say 50 miles, OPEC and other oil producing nations are in for a crash like no other in history. They won't be able to use "demand" as an excuse. Besides, wouldn't it be fun to watch one of the biggest nations that teaches hatred in the Muslim world to come crashing down into disparity? I know I'd like to watch. :)
Travis
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