PrintMarch 31, 2011
Oil Prices To Stay High
For years the United States and the rest of the oil consuming world looked to Saudi Arabia to stabilize the oil markets by arbitrarily increasing production the whenever wars, natural disasters or other factors occurred which could cause major price fluctuations. However it now appears that those days are over.
Per the Financial Times:
Saudi Arabia could need the oil price to average more than $100 a barrel by 2015 to sustain the public spending rises it plans in an effort to forestall the political unrest sweeping the Middle East.The oil market is growing increasingly worried about Riyadh's fiscal needs as it fears that they could force Saudi Arabia to pursue oil policies similar to those of Venezuela and Iran, traditionally the price hawks at the OPEC oil cartel.The break-even oil price the Gulf kingdom requires to balance its budget will jump from $68 last year to $88 this and then $110 in 2015, according to new estimates by the Institute of International Finance, a leading industry group.Only a decade ago, Saudi Arabia was able to balance its budget with oil prices averaging $20-$25 a barrel.The forecast of higher oil revenue needs come after the Saudi Government announced two packages of social spending totaling $129 Billion aimed at averting the spread of dissent that toppled the Egyptian and Tunisian leaders.
This analysis does not take into account what would happen to oil prices if the House of Saud is toppled in the next few years.
In any event the American consumer need not look for any relief at the gas pump. The negative impact of energy prices on the economy‘s anemic so-called recovery will accelerate. Higher prices are here to stay while the United States sits on oil reserves three times that of Saudi Arabia and subjects itself to the whims of the market while shipping $400+ billion a year overseas and not creating millions of new jobs in the carbon based industry and its related fields.
