“Saudi Arabia compensates for Iran’s shortfalls, but it has its Achilles heel”

Posted on March 29, 2012

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Saudi Arabia can compensate for Iran’s shortfalls, but it does have its Achilles heel, which is rising domestic demand, Senior fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies, James M. Dorsey said.

The expert was commenting on Saudi Arabia’s ability to compensate the oil shortage to the world markets, while Iran is being hammered by Western sanctions from all sides.

“Saudi Arabia has a vested interest in compensating for Iranian shortfalls as the result of sanctions given its opposition to Iran’s nuclear program and assertions that Iran is stoking unrest and sectarian tension in the Middle East and North Africa,” Dorsey added.

He said in the future, Saudi Arabia can encounter problems, coping with rising domestic demand which means that over time it will have less production available for export.

iran saudi arabiaCurrently Saudi Arabia is producing around 11 million bpd, and has said that it is ready to raise its output to 12.5 million barrels per day, if necessary. Of those million bpd, 2 million bpd go to domestic consumption. In 2010, Saudi Arabia’s oil reserves were 264.5 million barrels, according to BP.

When asked whether Saudi Arabia would be able to compensate the growing need for oil supplies, Dorsey said it is possible.

“Saudi Arabia is likely to be able to compensate to a large extent. It may not want to publicly admit this does not contradict the fact,” Dorsey said. “Nonetheless, Saudi capacity longer term is in question as it increasingly needs to meet rising domestic demand”.

Dorsey underscored, that Saudi Arabia is the only major oil producer with the ability to expand capacity.

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