Saudis target 'triple-digit' oil price for the first time
Saudi Arabia said on Monday it wanted to keep crude oil prices at around $100 (U.S.) a barrel, the first time the kingdom has targeted a “triple-digit” price and a quarter above the previous ambition of $75 suggested by King Abdullah in November 2008.
Ali Naimi, the powerful Saudi oil minister, said the world’s largest oil producer aimed to “stabilize” oil prices slightly below the current level of $111 a barrel.
“Our wish and hope is we can stabilise this oil price and keep it at a level around $100”, Mr Naimi told CNN television. “If we were able as producers and consumers to average $100 I think the world economy would be in better shape.”
After the big riots last year, the Saudi Arabian monarchy satisfied many of the protester’s demands with way more social spending. But at the same time, obviously the monarchy wants to keep up their exorbitant lifestyle - so, oil prices are going to have to go up to compensate.
Note that the Saudi Arabian opinion carries the most weight of any OPEC country - not only because the country has the biggest oil reserves and is the biggest producer, but also because all the other OPEC countries are already pumping at full capacity anyway. Only Saudi Arabia currently has some spare capacity, where they could produce more but choose not to in order to keep prices high. (Or so they claim, anyway. They might have zero spare capacity, and be bluffing to get a better negotiating position. Obviously government stats are pretty suspect here.) So a lot of the margin in changing oil prices comes from Saudi Arabia, and when the Saudi government suggests the price should be higher they can usually have their way.
Anyway, this kind of indicates the problem that Middle Eastern countries are increasingly facing: their citizens are demanding a better standard of living, but their governments are funded entirely through oil revenue, and oil production can’t really increase very much. Therefore, to keep the citizens happy, oil prices need to stay high (like, on the order of $100/barrel) and probably need to keep climbing to avoid the kind of revolution seen in Tunisia, Egypt, and Libya. Not sure that’s sustainable.
