This means it has committed to being able to raise

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Unformatted text preview: to ten, million barrels per day in 20o8-even as production in four other OPEC countries, Iran, Iraq, Nigeria, and Venezuela, fell short of what 1998 projections had assumed they would be producing by eight million barrels a day. Still, with every barrel produced in Saudi Arabia expected to make up for shortfalls elsewhere, there was only a little surplus capacity for the world. Further disproving the peak oil theory, since 2003 Saudi Arabia has also successfully engaged in a massive campaign to increase its production capacity (not just its actual production). This means it has committed to being able to raise its output quickly and massively in the event supplies from the second- and third-largest producers in OPEC are disrupted. Saudi capacity was standby, meaning that it could be developed within 12 to 18 months. And because of Saudi Arabia's efforts to increase its production capacity, OPEC's total production capacity could exceed 37 million barrels per day in 2tit.This would be a record level: five million barrels per day more than in 2002 (before the strike in Venezuela) and more than ten million barrels per day above today's level. The disappearance of spare Saudi production capacity was the most critical element in driving up prices from 2003 to 2008-and its reemergence should be the most critical element in keeping them low over the next three years (or more, if global demand fails to rebound enough). Saudi Arabia wants spare production capacity for multiple reasons, including, importantly, to give it influence in the G-20 (the group of finance ministers and central-bank governors from the leading economies) and other international forums. Riyadh's ability to increase production is the key to its being taken seriously. Saudi Arabia will also likely use its surplus capacity to keep prices moderate in order to spur global economic growth, maintain longterm demand for oil, and deter investments in alternative sources of energy. In addition, by increasing Riyadh's ability to keep prices low, surplus capacity will help it reduce the revenues of oil producerssuch as Iran, Russia, and, to a lesser extent, Venezuela-that use them in ways that undermine regional stability. 69 Last printed 9/4/2009 7:00:00 PM Oil DDW 2012 1 Saudi spare capacity is massive and keeps countries hooked on oil Goldthau, head of the department of public policy and associate professor at Central European University, 11 Andreas Goldthau, head of the department of public policy and associate professor at Central European University, 12-20-11, [“A Public Policy Perspective on Global Energy Security,” International Studies Perspectives Volume 13, Issue 1, pages 65–84, February 2012, http://onlinelibrary.wiley.com/doi/10.1111/j.1528-3585.2011.00448.x/full] E. Liu A related problem occurs with regard to supply-sided mechanisms to calm down the oil market: spare capacity. Spare capacity is an essential element of oil market psychology, as it determines how “safe” market participants are against a price shock stemming from sever...
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