Saudi Arabia to increase oil output

Jad Mouawad reports in the New York Times this morning that Saudi Arabia is planning to bump up its oil production half a million barrels a day in an attempt to do something that doesn’t entirely make intuitive sense, but then I am not an economist:

While they are reaping record profits, the Saudis are concerned that today’s record prices might eventually damp economic growth and lead to lower oil demand, as is already happening in the United States and other developed countries. The current prices are also making alternative fuels more viable, threatening the long-term prospects of the oil-based economy.

Apparently this is some sort of super-duper double reverse psychology here. Psyche!

Backstory: Global supply and demand are precariously balanced right now. Supply was at 86.6 million barrels per day in May, according to the International Energy Agency. IEA puts international demand for the year at 86.6 mbd.

In April, Saudi Arabia pumped 9.05 mbd, according to IEA (see p. 20). IEA says its capacity is 10.9 mbd – the only country in the world with enough spare capacity to add significant oil to the market in the near term. (Others are not so sanguine about Saudi capacity, though it’s not clear to me what time scales matter here.)


  1. Unfortunately, the article said nothing about the nature of the extra production: is it sweet crude (which everybody wants) or the the sour (suflur-heavy) crude (for which there is little or no extra refining capacity)?

    I.e., not all barrels are equal.

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