May 16, 2008

Saudis offer Bush a drop in the bucket – could this be inflationary?

I think this may actually be more insulting than no oil increase at all.

Anyway, Saudi Arabia has just announced it will raise oil output — by a mere 300,000 bbl/day, a relative drop in the bucket. That’s less than one-half of 1 percent of world daily production.

In the bigger picture, this is probably going to raise Peak Oil questions. Preznit Bush’s groveling aside, it would seem to indicate the Saudis have some level of worry about tight oil supplies being stretched to the inflationary breaking point during the summer vacation season, but that, on short notice, at least, they can’t do much about it.

Perversely, because of that, I wonder if this won’t actually drive prices upwards.

In other words, this piddly increase may lead a lot of people to think, “Is that it”? Not only is it less than half a percent of world daily production, it’s less than 3 percent of Saudi daily production.

If not Peak Oil, to me, that at least says “old fields.”

Buy a Prius.

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