Saudi oil exports under threat from within
Huge fuel subsidies, which have helped sedate Saudi social unrest throughout the Arab Spring, are exacerbating a demand boom that is lapping up the world's largest oil reserves.
October 15, 2011 10:00 by Reuters
Saudi gasoline consumption rarely exceeded 250,000 bpd until 2007, but has remained above 350,000 bpd of for most of 2011 after breaking through the 300,000 level for the first time in 2010, according to government data.
“Internal demand is rising very fast… And it’s still accelerating,” Herman Franssen, director of the Energy Intelligence Group, told a conference in Dubai last week.
“If you want more (oil) exports demand has to be controlled more than it has been so far.”
Gasoline retails at Saudi filling stations at an average price of $0.53 per gallon, equivalent to $22.3 per barrel, but industrial consumers pay far less, with Saudi Electricity paying $2.7-4.3 per barrel compared to export prices of around $100.
Jadwa notes that the government made some progress when it raised electricity tariffs for industrial users in mid 2010. But the last change in petrol pump prices was a price cut in 2006 and there seems little prospect of Riyadh reversing it.
“No way will Saudi slash fuel subsidies anytime soon. Suggesting they must do it ignores the fact that they also must not do
it to ensure continued support of the regime and to keep unrest at a minimum,”Jamie Webster, Saudi energy analyst at PFC in Washington, said.
“There is not much use in ensuring you have adequate exports if the method to get there puts your existence into potential jeopardy.” (Editing by William Hardy)