The Truth Behind Saudi Arabia's Oil Supply
We’ve suspected for some time Saudi Arabia has less oil in the ground than they claim. Apparently so do diplomats in the US State Department…at least, according to even more scintillating cables released from Julian Assange’s WikiLeaks website.
The cables come from inside Saudi Arabia’s state-owned oil company, Saudi Aramco.
In 2007, Aramco’s former head of exploration Sadad al-Husseini told the US consul general in Riyadh that the firm had purposely overstated its reserves by 40% to spur foreign investment.
“Our mission now questions how much the Saudis can now substantively influence the crude markets over the long term,” reads one of the cables. “Clearly, they can drive prices up, but we question whether they any longer have the power to drive prices down for a prolonged period.”
None of this will be news to longtime readers, but it might register a minor blip on the EKG of the couch-surfing nightly news set. It could even make an impression on readers of the Drudge Report, where the headline is prominently displayed this morning.
Ultimately, however, the revelation that the Saudis are 40% less impressive than they were yesterday will have little impact.
“The bottom line is that in the short term,” says our oil analyst, the vastly popular Byron King, “Saudi’s problem doesn’t really matter. They’ll export as much oil as they need to cover their bills and shape the price environment. The tankers will sail.
“Medium term, Saudi will have trouble meeting its goals. But characteristically, the Saudis will cover up the problem.
“Long term, every day that we don’t plan for new ways of running the energy-consuming part of the world is another day closer to disaster.”