Based on a document obtained through WikiLeaks, The Guardian reports that Saudi Arabia can't pump enough oil to keep fuel prices stable.
The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.
The revelation comes as the oil price has soared in recent weeks to more than $100 a barrel on global demand and tensions in the Middle East. Many analysts expect that the Saudis and their Opec cartel partners would pump more oil if rising prices threatened to choke off demand.
In layman terms, what the Guardian is reporting is that when the price of oil becomes too expensive, the Saudis have produced more, adding more supply to keep prices steady. If Saudi Arabia has in fact reached "peak oil," which this report argues it has, it means the Saudis couldn't tap more oil and the prices of crude would jump permanently.
After this report, however, the market didn't react in the way you might expect. In fact, you could say it took a long boring yawn and said, "So what?" A few minutes ago the price of crude was actually down slightly to $86.60 a barrel.
Kiran Stacey at the Financial Times thinks that's because the assessment in the cable isn't surprising because it's coming from Sadad al-Husseini who's said the same thing in the past.
The Wall Street Journal spoke to al-Husseini, who said the cable is being taken out of context. The problem, he explains, is that he took definitional issue with his Saudi colleagues. The Saudis stated they had 716bn barrels in reserves. But al-Husseini thinks that number includes both recoverable and non-recoverable oil. The Journal reports:
Mr. al-Husseini says he has no problem with either Saudi Aramco's official figures on current proven reserves or Mr. al-Saif's estimate, but was simply making the point that to describe "oil in place" as reserves was to inflate the kingdom's figures by several hundred billion barrels.
By that reckoning, the world of energy looks pretty much how it looked yesterday, with Saudi Arabia set to remain the world's biggest producer for some time yet.
Kevin Drum at Mother Jones points to a simpler outlook: "There's always Iraq, of course," he writes, "which certainly has more production capacity if it can develop it."