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June 22, 2008
Saudis May Increase Production Again
In an effort to tamp down speculation which the Kingdom believes is driving oil prices to "dangerous" levels, Saudi Arabia has indicated that it will be willing to to start pumping additional oil beyond the 200,000 bbl's a day they have already promised in July
Saudi Arabia, the world's largest oil exporter, has been under intense pressure from the U.S. and other oil consumers to increase its crude output to help slow the soaring price of oil.
The kingdom already announced modest increases and said it would pump 9.7 million barrels a day beginning in July. But those increases have not done much to stem the skyrocketing price of oil, which closed near $135 a barrel on Friday.
The high prices are affecting consumers and economies across the United States, Europe and much of the world. Many countries have experienced social unrest as rising fuel prices have driven significant increases in the cost of food and other basic goods.
The cost of gasoline has also become a sore point in the U.S. presidential race, with President Bush and Republican candidate John McCain calling for lifting of a long-standing ban on offshore oil and gas drilling to increase domestic oil production. But Democratic candidate Barack Obama has said such steps will do nothing in the short term to ease American consumer's pain.
Will this cool the speculation fever that is largely responsibile for the steep rise in oil prices? It might depend on how the US responds. If the US were to indicate that it would be willing to drill in places previously off limits - coupled with the Saudi bump in production - it just might start oil prices downward.
By itself, the Saudi offer may do the trick anyway. No one thought they would increase production as much as they have promised for July so any extra they agree to pump will certainly be watched very closely by speculators.
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