Saudi Arabia calls for $75/bbl oil

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The King of Saudi Arabia is the most important person in the oil industry. He controls the largest oil reserves, and is the largest single producer. Previous Kings have let their Oil Ministers do the talking at OPEC meetings, and to the world’s press. But King Abdullah, who succeeded in 2005, has recently become more public with his own thoughts.

In April, with oil at $100/bbl, he rebuffed appeals to pump more oil, saying “when there were some new finds, I told them ‘No, leave it in the ground, with grace from God, our children need it’.” But then in June, as prices made their final ascent towards $147/bbl, he called an emergency Energy Summit in Jeddah, and said he thought $100/bbl was “too high“. Now, he has told a Kuwaiti newspaper that he thinks $75/bbl is a “fair price“.

The blog therefore deduces that the King’s ‘target range’ is currently $75 – 100/bbl. This is also the level required to attract the investment necessary to maintain current levels of oil supplies. Without new investment, supplies will decline, as depletion rates are now 9.1% per annum on existing fields. Yet in the short-term, it is hard to see the chemical industry being able to afford such prices, as recession continues to bite.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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