So how do Libya and Saudi Arabia compare in terms of oil production? Based on recent media headlines, it sounds as though Saudi oil production wouldn't suffice if it became necessary for the Saudis to step in to make up for any possible reduction in the oil supply caused by the geopolitical problems in Libya. But looking at the data, we notice the two countries don't really compare.
According to the
US Energy Information Administration, Libya currently only supplies about 1.7 million barrels a day whereas the Saudis supply over 8.5 million barrels daily (see charts 1 and 2). Also, in regard to production
capacity, we see the Saudis could supply up to 12 million barrels a day (chart 3). With such a large unused capacity, the Saudis could very well fill the gap potentially created by a shortage in Libya. Thus, it seems unlikely that the world's oil supply will be highly and permanently affected by the current events in the Middle East.
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| Chart 1 |
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| Chart 2 |
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| Chart 3 |
Some people at Goldman Sachs, among others, put in doubt this spare capacity. Of course they must have put a pretty lucrative bet in the books before publishing. Self fulfilling prohecy is what they call it?
ReplyDeletehttp://blogs.wsj.com/source/2011/03/08/goldman-says-saudi-arabia-is-misleading-the-world-about-oil-production/?mod=google_news_blog
2plates, I take your point regarding GS conviction in their assessment. I doubt that they would make such assertions without first considering their impact on the market or on the bank's own reputation. That being said, GS is probably on to something. If that's the case, then there is definitely an argument to be made in favour of tapping into other oil buffer stocks. I'll be talking about this in my next entry.
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