Concerned that skyrocketing oil prices might induce a worldwide economic slump, Saudi Arabia is planning to increase oil production next month by about a half-million barrels a day, The New York Times reported on its website late Friday. Citing unnamed analysts and oil traders who have been briefed by Saudi officials, the newspaper said the increase could bring Saudi output to a production level of 10 million barrels a day.
The move is seen as a sign that the Saudis are becoming increasingly nervous about both the political and economic effect of high oil prices, the report said. While they are reaping record profits, the Saudis are concerned that today's record prices might eventually dampen economic growth and lead to lower oil demand, as is already happening in the United States and other developed countries, according to The Times. The current prices are also making alternative fuels more viable, threatening the long-term prospects of the oil-based economy, the paper said. Saudi Arabia is currently pumping 9.45 million barrels a day, which is an increase of about 300,000 barrels from last month. The Organization of Petroleum Exporting Countries on Friday cut its 2008 estimate of growth in world oil demand, as high prices and slower economic growth brake demand in major industrialized countries, the United States in particular. Global oil demand was now projected to rise by 1.28 percent in 2008, the Organization of the Petroleum Exporting Countries said in its June monthly report, lowering its prior estimate of 1.35 percent. [End of report]
Well, well what do we have here. Saudi Arabia which is of course the world's biggest oil exporter, having a change of mind by increasing oil production after months of saying no to it. If you could still remember President Bush had visited Saudi Arabia twice this year, pleading with King Abdullah to step up production but it came to no avail with Saudi Arabia arguing that the markets were well supplied and that an increase in production won't help to reduce the oil prices. As you all know, the oil prices have been increasing to a record high almost every day. Oil prices have gained 40 percent this year, rising to nearly $140 a barrel in recent days and driving gasoline costs up as well. Some analysts have even predicted that prices could reach $200 a barrel this year as oil consumption continues to rise rapidly while supplies lag and why not? Everyday as I watch the news, I always hear about new record for oil prices and it keeps increasing everytime. I won't be surprise if the price of a barrel could reach $200 or even more if the current rate continues.
It is good to hear this news but I wonder if it will actually help. Logically speaking it could. More supplies of oil production means more demands will be met and oil prices will go down then. I certainly hope that will be the case but Im sure the Organization of the Petroleum Exporting Countries (OPEC) won't be please with Saudi Arabia's decision. Their argument is that the current increase in oil prices is not due to a shortfall in supplies, but instead blaming speculators and a declining dollar, for driving up oil prices. The Americans on the other hand are saying OPEC is to blame because the OPEC producers are curbing supplies to drive up prices. The production increase though would only amount to less than 1 percent of global consumption but I think that is better than nothing right. I am also thinking that increasing in the production will not solve the matter entirely, more needs to be done. Every nation, especially members of OPEC needs to come to the consensus that the oil problem is a huge problem and will have catastrophic outcome if not deal with. With the oil and food prices so high right now, the inflation rate is increasing too which is not a good thing. World leaders need to do more to stop the prices from going out of control.
You can see the effect that it is having around the world already now. People are marching on the streets to protest and it is getting more difficult and expensive for them to pay their daily expense. Imagine what would happen if it actually reach the $200 point. I hope that will not happen but looking at the situation now, its difficult to rule out that possibility. I think the OPEC members have a huge role to play in this problem and they should take the lead and find whatever solution that might be before it is too late.
*The report was taken from AFP.
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