UAE Leader Admits Reason to Maintain High Levels Of Oil Production

There has been a great deal of discussion with regards to the high oil supply by certain members of OPEC (such as Saudi Arabia and the United Arab Emirates), and the effect that this has had not only on the price of oil and gas internationally, but also the effects on countries that are oil producers or are looking to increase their oil output.

I wrote earlier that this is a move by Saudi Arabia and some other states to ensure that there is not a strong push by United States and Canadian oil companies to increase exploration and oil output. However, Saudi leaders were not willing to say that the reason that they are maintaining oil supplies are to ensure their continued control of the oil market. In fact, in a December 22nd, 2014 CNN interview with Saudi Oil Minister Ali al-Naimi, when asked about Saudi output and how long the supply would continue, he essentially said that it would always be at these levels. The Oil Minister was responding to ideas that some have that Saudi Arabia is looking to do this to counter loses to the oil market by other states.

Despite his comments, it is difficult to believe that Saudi Arabia is not merely doing this just long enough for other oil companies to cut exploration, only to then later cut oil supply. However, while Saudi Arabia is not willing to say that much, the United Arab Emirates are. For example, according to a January 13, 2015 AFP (in Yahoo) report, United Arab Emirates leadership said that they would not attempt to prop up oil prices, saying that there needed to be a reduction in oil from North America. Despite the fall of prices since the Summer, supply is not diminishing. Instead, “the pace of the slide accelerated in November when the Organisation of the Petroleum Exporting Countries (OPEC) decided to maintain its production unchanged at 30 million barrels per day” (AFP, in Yahoo, 2015). In the story, United Arab Emirates Energy Minister Suhail al-Mazrouei was quoted as saying that “[w]e cannot continue to be protecting a certain price…” He went on to say that “We have seen the oversupply, coming primarily from shale oil, and that needed to be corrected…”.

And with regards to a hike in prices, Mazouei was quoted as saying “[i]t is unlikely that we’ll see a sudden rise.” 

While he is saying there will not be a spike in prices, I would be not surprised at all if there will be one, particularly when Saudi Arabia and the UAE feel better than U.S. and Canadian oil companies do in fact reduce their exploration and move away from discussions of higher production. And with little pressure from the U.S. public–who seems to be enjoying lower prices, there is little pressure domestically for politicians to focus on  a significant campaign of alternative fuels. However, as the U.S. moves away from exploration, in time, OPEC could increase output again, leaving the United States to continue to be dependent on the oil, even at higher prices.