With high energy prices and pressing concerns about supply disruptions, the arguments over the state and fate of the global oil economy keep getting more interesting by the day. For example, while Saudi Arabia's oil minister, Ali al-Naimi, recently made some soothing comments at the World Petroleum Congress, plenty of people out there are far more worried.
To begin, al-Naimi claimed that there is plenty of oil available to meet future demand and that the Saudis currently have excess capacity. The problem, he said, is that there are no customers -- refineries are already running at capacity. That sets up a bizarre scenario in the markets: Some people are afraid that declining oil-production numbers presage trouble (and so oil prices go up), while others say that there's plenty of oil available but production is below capacity because there isn't enough refinery capacity to use it.
That's all well and good, but al-Naimi's other comments might be considered more controversial. In particular, he said that Saudi Arabia will boost its reserves by nearly 76%, or 200 billion barrels of oil, and increase daily production to as much as 15 million barrels per day.
The trouble with the first number is that the Saudis don't permit external audits of their reserve figures. As we've learned from the likes of Royal Dutch Shell
One of the biggest worries now is that Saudi Arabia is overstraining its fields by pulling too much oil too quickly. There is plenty of technology available for this ramped-up extraction, with companies like Schlumberger
Unfortunately, it's virtually impossible to know the truth of the situation, since Saudi Arabia has a vested interest in keeping the taps flowing and painting a rosy picture for the world. After all, would companies like ExxonMobil
True or not, the comments from the Saudi oil minister highlight just how dependent the world is upon Saudi oil production. In a roundabout way, current high prices might be good, in the sense that they're spurring the development of oil sands, alternative energy, and other nontraditional approaches to working around oil. Nevertheless, with so much of an important resource concentrated in one place, we'll likely see plenty of nervousness and volatility for years to come.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).