Dossier: Black Gold, Texas Tea

In early May, the average price of a gallon of regular gasoline was $2.18 … A year ago, it was $1.89 … Also in May, a barrel of light crude oil was quoted at $52 … When that price increase was announced, the stock market promptly fell nearly 30 points … Around that time, Venezuelan President Hugo Chavez told reporters in New Delhi that “The world should forget about cheap oil.” … His country is the fifth-largest oil producer in the world … His four-day visit to India was aimed at increasing oil trade with that country and China to ensure their fast economic growth … Between 1995 and 2004, demand for oil skyrocketed by 12.5 million barrels a day (mbd) … Global oil consumption last year increased by 3.4 percent instead of the usual 1 percent to 2 percent … Nearly one-third of that growth came from China, where oil consumption soared by as much as 16 percent … By 2007, Beijing estimates that China will rely on foreign imports for as much as 50 percent of its crude oil … Behind China's new thirst for oil is the 6-percent annual growth of its national economy due to a booming manufacturing sector … Experts predict that China will become the world's second-largest oil consumer behind the United States … As a result of increased consumption, global spare capacity last year dropped to 1 million barrels per day, a 20-year low … Almost all of this was in Saudi Arabia, the world's largest oil producer… Its most prosperous oil field is called Ghawar … Discovered in 1948, the 300-mile-long sliver near the Persian Gulf is the world's largest oil field, and accounts for almost 60 percent of Saudi oil exports … With more than 260 billion barrels of proven oil reserves, Saudi Arabia is virtually the sole source of liquidity in the oil market … Both the International Energy Agency and the U.S. Department of Energy assume Saudi oil output will double over the next 15 to 20 years … To meet global demand for oil, Saudi Arabia will need to produce 13.6 mbd by 2010 and 19.5 mbd by 2020 … But in a study released by Simmons & Company International, an energy investment banking firm, Matthew R. Simmons contends that this won't happen … Simmons analyzed 200 technical papers on Saudi reserves by the Society of Petroleum Engineers, and his work was peer reviewed by dozens of experts … He argues that 90 percent of Saudi oil comes from five giant fields discovered between 1940 and 1965 … Since the 1970s, there haven't been any new discoveries of that magnitude, and the Ghawar's bounteous northern regions are almost depleted … After the Simmons study was released, Saudi oil officials flew to Washington to publicly refute the analysis … Privately they are less confident, telling The New York Times that production beyond 12 mbd would damage the oil fields.

You need to be logged in to comment.
(If there's one thing we know about comment trolls, it's that they're lazy)