Since the start of the millennium, the oil prices have soared five folds and have been hovering between $130-$140 this month, derailing many developing economies like India apart from hurting US where the oil consumption is highest in the world. In recent weeks soaring oil prices have incited demonstration from Italy to India where rise in oil price is a highly political issue too.
In view of such global hardships, Saudi Arabia, the biggest oil exporter of the world has planned to increase oil output by another 500000 barrels a day. Saudi has already stepped up production by 300000 barrels a day from May’08. The observers see the move as a sign of accomadation on the part of Saudi Arabia after the two visits this year by President Bush who has requested King Abdullah to step up production. Saudis are also said to be concerned about dampening of economic growth in US and other developed economies of the world and apprehends that this may lead to a lower oil demand in the end.
Saudis also apprehend that, at the current oil prices, alternative fuels are becoming more viable and countries may step up alternative fuel production and use, reducing the crude demand further. King Abdullah has also taken an unprecedented step of arranging a meeting of oil producers and consumers to address the issue of price rally in recent times, on 22nd June’08 at Jeddah. With all good intensions from Saudi, it remains to be seen that how much price reduction is achieved with increased production.
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