Saudi oil: "you will definitely see it"

An important figure in the OPEC era of the 1970s has stood up for Saudia Arabia's manhood. A Thursday CNN story reports (update 11/25/2004: replacement link for that story) that according to former Saudi oil minister Sheikh Ahmed Zaki Yamani,

consumers all over the world were suffering the fallout of a buying bonanza by hedge funds, who for the moment see the energy market as the best place to make a fast return.

By contrast, OPEC is doing its best to get prices down as it frets that spiraling energy costs could hurt global growth....

"Prices are already too high. There is additional supply available from OPEC -- you will definitely see it," he said.

Saudi Arabia has at least one million barrels per day of spare capacity above its current production of around 9.5 million bpd, giving the world supply system some slack, he said.

This is in sharp contrast to statements earlier this week by OPEC's current president who said, "The oil price is very high, it's crazy. There is no additional supply."

In Thursday trading, on bad Yukos news and new skepticism about OPEC's supply abilities, oil returned to record territory after a late-day slump on Wednesday. Stocks were hit by the oil news on Thursday as well, with the Dow taking a 1.6% bath.

Today could be another wild one. A refinery fire in Texas likely will cause a gasoline price spike. Meanwhile, crude is pushing $45.

The wild swinging of oil prices and rhetoric concerning the oil supply clearly has ramped up this summer. In the Bloomberg story linked above, a frenzied analyst is quoted:

"This market is a runaway freight train", said David Aleman, managing director of Axis Trading Co. in Beverly Hills, California. "There are so many different stories and they all seem to be bullish. A lot has to do with fear of the unknown".

All this is still seen by the vast majority of American citizens through the frame of entitlement to unlimited energy supplies. Boy will a lot of people be surprised when it becomes clear that limits have been reached.

Note: The new ASPO Newsletter for August is available. It contains a wealth of information and opinion about the larger world oil/gas situation.