It was only two years ago that King Abdullah of Saudi Arabia cautioned consumers that, without $75-per-barrel oil, there was no incentive for his kingdom to bring on new production. Today, apparently, even that price no longer works. Recently, the King announced that he has ordered a halt to all further underground oil exploration, arguing that further finds should be left to future generations of Saudis.

That announcement may have gone over well with the class of Saudi students he was addressing at the time, but for oil consumers around the globe it was an explicit statement that the country with the world’s largest oil reserves has no plans to tap them further.

So much for the International Energy Agency’s forecast for huge production increases in the kingdom. Like so many of the agency’s previous optimistic projections, this one isn’t any likelier to pan out. But what does King Abdullah know that the IEA doesn’t?

For one thing, leaving oil in the ground in Saudi Arabia only makes production in the Gulf of Mexico, and the recent environmental disaster at the sunken Deepwater Horizon rig, even more critical to future supply. Even if the effective federal moratorium on drilling expires in November, the loss of drilling rigs and the uncertainty arising from the staggering financial consequences borne by well operator BP will have lasting constraints on Gulf production. Throw in a few hurricanes and production could soon be retreating again, as it did after the 2005 storm season.

And if suspending oil exploration in Saudi Arabia or new deep-water drilling in the Gulf of Mexico isn’t bad enough, check out the new ad campaign against the Alberta tar sands, next in line after deep-water wells to drive future global oil supply. The campaign, “The Other Oil Disaster,” recently rolled out, urging American tourists (and, before too long, British ones) to boycott Alberta, which is quickly becoming a bête noire to the world environmental movement.

So where exactly is tomorrow’s crude supply supposed to come from? Clearly not from Saudi or from the Gulf of Mexico, where there are moratoriums in place on either exploration or new drilling. And not from the tar sands, which is an increasingly contentious source, both environmentally and economically. No doubt the oil industry will seek out new frontiers.

Those drilling rigs soon to be pulling out of the Gulf of Mexico can always find safe havens where the regulatory burden is less onerous. There are, after all, far fewer film crews covering the environmental devastation from the countless oil spills in the Niger delta, or elsewhere in the developing world, where the crush of poverty compels different environmental trade-offs than the ones to be made in the Gulf region or Alberta.

But no matter where you look, it is becoming increasingly clear that tomorrow’s oil supply is going to come from very different places than today’s.

Providing, of course, that it comes at all.

  • Denny

    As Jeffrey Brown has pointed out, higher oil prices over the past years have not enticed Saudi Arabia to increase oil production. Is that because they are saving it for future generations or is there simply not enough easy to find oil left to pull out of the sand or sea? In 1995 with an average price of $57 per barrel, Saudi Arabia produced 9.1 mbd. In 2006 the figures were $66 and 8.4. 2007, $72 and 8.0. 2008, $100 and 8.4. Looking forward, is Saudi production guided by price, supply limitations, or a combination of each?

  • Jeffberg

    Pool size distribution analysis alone was sufficient a long time ago for our experts and authorities to conclude that hydrocarbon extraction would be greatly constrained in the 21st century. Hubbert saw this in the late 40's, and published his results in the 50's. And as Colin Campbell explained in his open letter to the Guardian the IEA published this fact way back in 1998.

    Whatever economics course comes before Economics 101 includes the tidbit scarcity makes essentials more valuable. This is what the Saudi King is reacting to. The Saudis have finally grasped that no matter how fast we move toward renewables they will still be able to either sell or use all of their oil at a very nice profit indeed. The other thing the Saudis have finally figured out is that the economic utility provided by these BTU's and molecules is far more valuable than American dollars.

  • JB

    Dear Jeff,

    How much longer will King Abdullah be in power in Saudi Arabia. His successor, the Crown Prince, is not much younger and reported to be in poor health condition…

    What next in terms of leadeship in the Kingdom of the Sauds? The rules of succession are apparently very simple: the best should be asked to lead. In other words something similar to Darwin's “survival of the fittest”…

    Many “external parties” will do all they can to influence the selection process to secure a part of whatever is left. China, in particular, is now the largest buyer of Saudi oil and the largest energy user of the planet.

    Meanwhile, the Cassini space probe has reportedly found methane oceans on Titan, the largest moon of Saturn. After the Macondo debacle, this might me the only place where BP will be allowed to collect hydrocarbons… The EROEI of Titan's methane may be low but as long as it is over 1, better that than being publicly executed.


  • Gielsj

    I always thought Georgie W Bush was a little off promoting “democracy in Iraq”, while SA is right next door. Perhaps, in light of a failed succession, the US steps in to transform this “kingdom” into a modern state (of course, securing the US oil supply in the process).

  • Haileekimbley

    What Country Does He rule~

  • littleplanet

    I couldn't resist a small chuckle at Alberta's “bete noir” (Canada's Texas?)

    Such an oblique future…for the one item most critical for future growth…

    makes that whole growth paradigm feel a little like the queasy twinge that

    preceeds milk of magnesia – (usually a condition prompted by overindulgence.)

    And what will happen in years to come, when Canadians just can't shake the

    fact that the majority of our production is moving south of the border? (while we

    expensively import…) Not a happy prospect for a nation that is close to the top

    of the heap, in energy consumption per capita.