Put Up Or Shut Up For The Kingdom - Waiting For Oil Summit "Better Than Watching Top Chef"

[hatrack]

EDIT

Habits are hard to break, and once you change them you’re unlikely to go back to your old ways anytime soon. Once you’ve pushed your gas-guzzling Hummer into the river and start driving a Honda, you aren’t getting back behind the wheel of an SUV again anytime soon. The Saudis realize this too, and the potential for a permanent slump in oil demand worries the Kingdom, as the world embraces alternative fuel instead, or simply figures out ways to cut back.

This brings us to Sunday’s special OPEC meeting, called unilaterally by the Saudis. Might a policy shift be on the way – a willingness to open the spigots and let more oil flow?

Again, the scuttlebut says the Saudis may boost production by at least 200,000 b/d, which is only a drop-in-the-bucket. A more meaingful increase however, in the 500,000 to 750,000 b/d range, might really make a dent in oil prices. To avoid greater “demand destruction” for oil, it makes sense for Saudi Arabia to increase the flow of oil – at this point it’s in their best interests. The real puzzle is CAN they do it. As just about everybody’s mother used to say: where there’s a will, there’s a way.

The Saudi’s may have the will, but do they really have the excess capacity necessary to boost production in a meaingful way? The oil bulls say the Saudis are just bluffing... and they can’t wait to call that bluff. If they’re right, crude prices could keep right on shooting higher this summer. But if the Saudis are holding a full-house, then it could mean a decisive break for the bubble-like spell oil prices are under. Either way, it should be a great side-show on Sunday, full of interesting drama. I may have to TiVo Top-Chef just to watch the OPEC outcome unfold live on CNN this weekend.

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http://burnickblog.sovereignsociety.com/2008/06/its-put-up-or-s.html

[gasperc]

1. demand destruction in airline and SUV markets

so future sales will certainly see a small drop in demand