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.