by James Leigh, University of Nicosia Introduction
Saudi Arabia according to popular wisdom is a Persian Gulf Arab state, awash in vast amounts of oil, with high levels of oil production and massive oil reserves yet under the desert sands. However, the truth may be completely different.
Within this context the Saudis are exploring the opportunity to sell their oil on more transparent exchanges in which they feel they have some logical control over production levels and pricing in relation to world demand, and also be paid in currencies outside the anemic US dollar. Such a mover would be a great influence on all of OPEC. This has crucial implications for the US as it could take oil trading from US exchanges and eventually outside the dollar as the currency of trade.
The Real Saudi Arabia
Saudi Arabia has generally had falling oil production since its all-time peak in 1980 of 9.9 million barrels per day (mbpd). Present Saudi production is probably around 9 mbpd. The big question: Is declining Saudi production because the desert kingdom is running out of oil, or a voluntary action to reserve oil for potential higher prices in the future?