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From the trove of secret military and diplomatic cables released by the whistle-blowing website WikiLeaks comes the revelation that Saudi Arabia, the world’s largest crude oil exporter, may not have enough reserves to prevent global oil prices from spiraling upward.
In a story first reported in The Guardian, a London newspaper, it was found that a series of confidential cables from the country’s embassy in Riyadh urge Washington to strongly consider claims of senior Saudi government oil executive Sadad al-Husseini.
Al-Husseini, a geologist and former head of exploration at the Saudi oil giant Aramco told the Riyadh-based U.S. Consulate General in a series of several cables sent between 2007 and 2009 that the kingdom’s crude oil reserves may have been overestimated by as much as 40 percent.
He went further by explaining that the move was an attempt to instill confidence in Saudi Arabia’s reserves and in turn generate more foreign investment. However, Husseini said, Aramco’s 12.5 million barrel-a-day capacity needed to keep a lid on prices could not be reached any time in the near future.
Instead, the executive estimated the goal could be reached within 10 years, but before then — possibly as early as 2012 — global oil production could hit its highest point, which could have dire consequences for the often capricious global marketplace of crude oil and the consumers it serves.
Even if the Saudi executive’s claim is a difficult one to verify, or whether or not Washington chooses to act on the information, the revelation brought about by one of just hundreds of thousands of confidential cables from WikiLeaks poses an interesting question for the future of oil prices in the U.S. — and in particular, a state like Maine, said to be one of the most oil dependent states in the country.
Furthermore, the news comes at a time when oil prices have soared in recent weeks to more than $100 a barrel worldwide. Prices are also expected to continue rising through 2012, according to the Energy Information Administration, the statistical arm of the U.S. Department of Energy.
Analysts have pinned the escalation to a rise in demand in developing countries, in addition to tensions in the Middle East caused by a rash of anti-government protests in numerous countries throughout the region.
Much of Maine’s oil comes from Canada and other places, rather than Saudi Arabia, but if the revelation proves true could have far-reaching implications for the state’s economy according to Paul Marks, an analyst with the Energy Information Administration.
“Naturally, this is something we are watching very closely. States like Maine will continue to depend on oil for a number of necessities,” Marks said. “News like this is always to be taken seriously because it could have a very negative effect on the economy in such an oil dependent state.”
Marks also said that an spike in oil prices could have “very negative consequences” for Maine since the fuel plays a crucial role in several state industries.
He also said there is little that could be done to deal with the Saudi’s overstatement, other than to make use of diverse global resources.
Pointing to the vast exploration in natural gas and even oil currently taking place, Marks said even though the cable’s content is startling, there are many advancements being made in renewable energy and the oil industry that could potentially change the landscape 10 years from now.
The Associated Press reported last week that oil and gas supplies in the U.S. continue to grow and demand for gasoline is weak in the country.
As a result, the cables primarily concern the future of oil prices, something that has long been a source of vexation and second-guessing for industry analysts and economists alike.
Even still, a study commissioned by the Maine Conservationist Voters Education Fund, a citizen’s advocacy group, should cause even those most optimistic to turn a wary eye on the cables’ revelations.
The study found that 50 percent of the energy produced in Maine comes from oil. This leaves the state exceptionally vulnerable to the volatility of oil prices, according to the study’s authors. Additionally, it was found that the state spends $15 million on oil every day.
The research commissioned by the advocacy group comes on the heels of an effort by some state lawmakers to reduce the state’s dependence on oil by as much as 30 percent. Industry analysts within the state have said in the past that for every $1 invested in energy efficiency in Maine, economic output would increase by $5.
With these figures, including the $15 million spent daily on fuel at current prices, it is no surprise why Maine could be vulnerable to the realities of claims like the one made by Al-Husseini.
“While al-Husseini fundamentally contradicts the Aramco company line, he is no doomsday theorist,” state U.S. Consul General in the leaked cables. “His pedigree, experience and outlook demand that his predictions be thoughtfully considered.”
