A Nosedive into the Desert

Monday, March 12, 2007

In a lengthy analysis on The Oil Drum, Stuart Staniford agures that "since late 2004, the Kingdom of Saudi Arabia (KSA) has entered rapid decline of their oil production, at least for the time being."

Saudi production can be divided into two eras. In the first, prior to the third quarter of 2004, KSA had spare capacity and acted as the swing producer, making large voluntary changes in their production to stabilize the market. . . .

Since late 2004, KSA has entered a new era where they cannot raise production in response to demand side needs, and instead the major features of the production curve correspond to supply side events.