Three official explanations... and three real ones

Oil prices have reached another record, in part on the announcement that Saudi Arabia won't be ramping up additional production anytime soon.

In a series of statements, including one by the king himself, the
kingdom has warned consumers it does not reckon there is a need for
further expansion, an assumption disputed by the world’s biggest
developed countries.

The realisation Saudi Arabia will not increase production to 15m
barrels a day as quickly as important consumers and the markets had
assumed could put further pressure on oil prices, which touched fresh
records last week.

The Financial Times article lays out three official explanations: The king says he wants to conserve oil for future generations.  The head of the state oil company Saudi Aramco says he can't be sure the high prices will last forever.  And the country's energy minister sees ample spare capacity.

That last one just doesn't wash, and the FT pretty much says so:

Forecasts by the International Energy Agency, the watchdog of the
main consuming countries and an important participant in the forum,
reach a different conclusion.

Most recently the group calculated
that, even if all the policies to increase renewable fuels and to use
oil more efficiently were to be enacted on Tuesday, the world would
still need Opec’s daily production to increase by 11.5m barrels by
2030, the bulk of which would have to come from its biggest members,
such as Saudi Arabia.

That is a tall order. It is more than 50 per cent more than Opec has managed to increase output during 1980 to 2006.

The other two official explanations are more plausible.  But neither is likely the real story.

The real story is one of three possibilities.

  1. Matt Simmons's research into the Saudi oil fields is starting to bear its bitter fruit and the House of Saud is physically incapable of ramping up production to 15 million barrels a day — at least not without triggering catastrophic depletion rates down the road.
  2. The House of Saud is getting fed up with the falling dollar and Bush foreign policy and no longer wish to do Washington any major favors.
  3. Both of the above