From FT Alphaville:
Saudi oil: Peak conspiracy
The oil world’s been full of speculation about the shift of strategy last year by Saudi Arabia which saw it keep the pumps running even as the price fell, turning an initial drop into a plunge.
There may be a simpler explanation for Saudi’s willingness to see prices slide than an attack on US shale or a “political plot” against regional rival Iran, though: a change in the Saudi view on peak oil.
The Saudis have two choices with their oil: sell it now, or sell it later.
If they think oil is running out, it is reasonable to think prices will keep rising in future – perhaps rising much faster than the returns they could earn by deploying the money elsewhere, particularly since they invest a lot of their excess foreign exchange in US Treasury bonds paying almost nothing. The logical thing to do is to keep as much oil in the ground as possible, pumping only enough to keep the global economy ticking over.
On the other hand, if peak oil is so much bunkum, at least for the foreseeable future, then it makes sense to pump a lot more oil. Worse, if peak oil is the opposite of the truth – that demand for oil might go into a long-term decline – then it makes sense to pump as much as possible as soon as possible, whatever the price, because it will only be worth less in future.*Pique= A feeling of irritation or resentment resulting from a slight, especially to one’s pride: he left in a fit of pique
Not being a senior member of the Saudi royal family I don’t know the truth. Perhaps the Saudis did a secret deal with the US to hurt Russia. Perhaps they are trying to pressure the Russians to cut off Bashar al-Assad in Syria.
It is true that the simplest explanation isn’t always the best in the strife-torn Middle East. But new technologies are making it easier to access oil from shale, Brazilian pre-salt formations and Canadian oil sands, while global warming, ironically, is making the Arctic look like a potential new source of wells....MORE
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"Why Peak-Oil Predictions Haven't Come True"
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Citigroup: "Resurging North American Oil Production and the Death of the Peak Oil Hypothesis"
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