Saudi’s Increase Spare Capacity to Offset Iranian Influence

Saudi Arabia’s growing fear of Iranian influence in the Middle East may driving the world’s largest crude oil exporter to prepare a more aggressive long-term political oil strategy that would counter the Iranian ascendancy.
According to Dow Jones, “under a new, accelerated production program, the kingdom could increase its spare oil drilling capacity to at least 3 million barrels a day by 2011, up from around 2 million now.
Intelligence experts estimate Iran might have the capability to develop nuclear weapons by then. Additional spare capacity could give the Saudis greater leverage as a political tool”.
Saudi Arabia – which is largely Sunni – is worried that Iran’s ascendancy might tip the balance of power towards a Shi’ite domination of the Middle East. Saudi Arabia has repeatedly said it won’t use oil as a political tool. But recent developments in Saudi Arabia’s plans to boost production, and briefings by a former consultant to the Saudi ambassador to the U.S. have raised questions about whether the country is considering new strategic oil options to counter Iranian influence in the region.
Some analysts say Saudi Arabia is preparing its massive crude oil reserves as its own “nuclear” weapon to undercut Iranian power. If the Saudis were to flood the market with increased oil production, it could halve the price of oil, according to some experts.
Although this is unlikely to happen, Saudi Arabia is accelerating its near and long-term production expansion plans. The country’s previous plans called for maintaining its spare production capacity – the prime metric that drives crude price levels – at around 2 million barrels a day. Saudi Arabia is said to be trying to increase spare capacity to 3 million barrels a day by 2011.
With that it could well influence the oil price.