Saudi Arabia averaged 8.2 million barrels a day last year and claim to be able to produce as much as 15 million. Cutting 800,000 barrels from 8.2 million is an extremely large cutback, nearly 10%.
Sunday, April 24, 2011
Saudis Cut Oil Production
Saudis recently announced they would reduce oil production/extraction by 800,000 barrels a day. With the demand for oil on the rise, this move is interpreted by some to bolster prices, which is speculated to be used for funding promised social programs to protect themselves from political turmoil.
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The explanation for the cutback in Saudi oil production that seems worth examining is the one mentioned in the article about political unrest. The Saudis have seen the mood in the region and are, smartly, planning various social programs to stave off unrest in Saudi Arabia.
Using oil revenue as a way to pay for these programs seems very likely. The fear of political upheaval must be the most immediate concern on the Saudi's minds right now. If their government is toppled they will have wished they made democratic adjustments earlier.
I agree with Scott. Oil revenues are easily the Saudi's number one source of money. These programs are a good way to stave off revolution, but they could also be a way for Saudis to gain favor among human rights activists, as the current Saudi reputation is less than stellar.
As for the United States, this move could be devastating for our growth, if the 10% cutback is implemented for an extended period of time. It could also help infant alternative energy industries, opening up new venues for job creation.
A good move for Saudi Arabia, but a bad news for other countries. Seems like the economy will stay low for a while.
This is a bad sign for the world economy. Increase in energy cost affects everybody. In the short run it may provide the Saudis the funding for its political problem. But if the oil price kept increase sharply like now, soon enough there would be cut back on productions everywhere, putting the world economy back to its dark days.
It is interesting to see how the cut backs in the oil supply have affected producer and consumer prices around the world; after having been a couple days of course. I wonder if the prices will continue to rise or is everyone settled in?
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