Saudi oil production decreased in April

by Dave Schuler on June 7, 2006

James Hamilton of Econbrowser comments on a WSJ article which reported that April Saudi oil production was 400,000 barrels below its two-year average volume. James asks: why, when oil is selling at over $70 per barrel, would the Saudis cut production?

Proposed explanations include:

  • a lack of buyers at the high asking prices
  • a monopolist cutting back production to raise the price
  • the Saudis don’t have as much in the way of reserves as they’ve been telling us
  • distribution bottleneck
  • the Saudis are sending a message to the Iranians that they’ll meet an embargo of Iranian oil with Saudi oil

James addresses the first two explanations in his post and finds them wanting.

{ 1 comment… read it below or add one }

TallDave June 8, 2006 at 9:23 am

That Saudi report struck me as suspicious, too; glad to see I wasn’t the only one. Could have serious implications for the near future – though I suppose it’s good news for alternative fuels.

FYI My email is attached to the post.

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