Saudi Arabia's Overrated Oil Weapon

(Weekly Standard) Max Singer - The following myths, or outdated facts, support the world's misjudgment of the power of the Persian Gulf oil producers--especially Saudi Arabia, but also Iran, Iraq, and the Gulf states. Most of the world's oil reserves are in the Middle East. Wrong. That is only true for "conventional" oil, the stuff that flows easily. When you count "unconventional" oil, Canada has larger reserves than Saudi Arabia. Technological developments over the last 10 years have reduced the cost of producing unconventional oil to below $15 a barrel, so that it is being produced profitably at the price at which oil has sold for almost all of the last 30 years. The world can't get the increased oil supply it will need in coming years without buying a larger share from the Persian Gulf. Wrong. There are many potential sources of increased oil supply--in addition to unconventional oil. In 2020 the Gulf may supply even less than the 23 percent of the world total it provided last year. The United States and other consumers need Gulf oil much more than the Gulf countries need the money paid for the oil. Wrong. Most of the Gulf countries have become very dependent on their oil income, which provides almost all their foreign currency. The oil-consuming countries get less than a quarter of their oil from the Gulf and have stockpiles of oil that could replace Gulf supply for six months or more. Saudi policy toward the United States is based on their perception of our fear of their oil power. When the American political community realizes that the world economy is not in Saudi hands as much as the Saudi economy is in the hands of Western oil buyers, Washington can stop being afraid of the Saudis.

2003-08-12 00:00:00

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