Thursday, April 29, 2010

Saudi Oil Exports Will Start to Decline.

Saudi Arabia is serving notice to the world that they are not going to be the engine that supplies our growing appetite for oil in coming years. The Saudis generally play their cards close to the vest when it comes to information about reserves and production capacity, but now they are saying that future exports will decline due to growing internal consumption. However, some experts believe that declining Saudi production will be the larger contributing factor. No matter the cause, when the world's leader in both reserves and production says that its external output will drop, there's a problem.

Numerous reports say that Saudi's (and the world's) largest oil field, Ghawar, is now in decline. Another indication of potential declining output was when Saudi Aramco began exploration efforts in the Red Sea, an area it had previously ignored to focus on low hanging fruit in the eastern province. Saudi production has been stagnant in recent years, although that is attributable in part to OPEC quotas. But if the world's largest oil producer is running into supply constraints at a time when the world's central banks are pumping record quantities of fiat scrip, the inflation picture will take on a ominous new dimension.

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