The Saudi Spigot

Riyadh is about to open the oil tap wider, but what happens when it's tapped out?

WHEN PRESIDENT Bush traveled to Saudi Arabia in mid-May to plead for an increase in oil production, his friend King Abdullah resisted him. U.S. consumers might be straining to afford gasoline, the Saudi monarch said, but the best he could do would be an additional 300,000 barrels a day, raising total output to 9.45 million barrels a day. Now, however, the Saudis have improved their offer. In response to appeals from U.N. Secretary General Ban Ki-moon and others, the kingdom has signaled its willingness to open the spigots wider, by 200,000 barrels a day above what it promised Mr. Bush. After months of blaming the spike in oil prices on speculators, the Saudis have finally admitted, tacitly to be sure, that the root cause is insufficient supply. An official announcement of expanded production will probably come at an energy summit in Jiddah today.

Why the shift in Riyadh? The Saudis have finally begun to worry that runaway oil prices are not in their long-term interest. For them the best of all possible worlds is one in which oil costs enough to ensure them a steady flow of huge profits but not so much that consumers switch to alternatives. But in the six months that ended April 30, Americans drove 30 billion fewer miles than in the same period during 2006-07, according to the Transportation Department. Toyota's first hydrogen-powered car just rolled off an assembly line in Japan. If this keeps up, the world will no longer be addicted to oil.

The question, though, is whether it is still within the Saudis' power to bring oil prices down dramatically. With 260 billion barrels of proven reserves -- a quarter of the world's total -- and an estimated productive capacity of 11 million barrels a day, they remain the likeliest source of fresh supply. But even an additional 500,000 barrels a day is only about half the increase in global consumption last year, almost all of which occurred in Asia. And it will take years for the Saudis to raise their productive capacity even higher, as they say they want to do. Some energy experts think the legendary Saudi fields are far closer to being tapped out than the secretive kingdom admits. Matthew R. Simmons, an investment banker specializing in energy, has published a much-discussed paper suggesting that Saudi oil production is already near its physical limits -- a conclusion the Saudis vigorously dispute.

Given the world's dependence on their oil, it would be nice if the Saudis provided more information about their reserves, though we're not holding our breath. What can be glimpsed in these recent events, though, is a future political dynamic in the Middle East, one in which Saudi Arabia has far less leverage than it has now. In that future, Riyadh might no longer be the place Western leaders come, hats in hands, to plead for cheaper oil -- and to offer gifts in return that range from indulgence of Saudi human rights violations to arms sales to military protection. No wonder the Saudis might be counting their windfall profits with one hand but fingering their worry beads with the other.