Dose of honesty from Saudi prince

aura reading, rose rosetree Pictures, Images and Photos
Yesterday I watched an interview on CNN with Prince Al-Waleed bin Talal of Saudi Arabia. He is not only a Saudi prince but also the 26th richest man in the world. He discussed, among other topics, the price of oil. He said that a barrel of oil should be about $70-$80 instead of the $100 or so that it is right now. Although I have heard this number before and even discussed it in previous posts, this time the Saudi prince was very honest with his and his country’s reason as to why they want it at that price.

First of all, at the current supply/demand level of oil, the real value of the commodity is in the $70-$80 range. However, speculators that worry about revolts in the Middle East account for the additional $20-$30 a barrel that oil is trading for now. Saudi Arabia largely controls the supply side of oil and they can produce more if need be. The Saudi prince said that his country wants oil to trade lower than it currently does because at $100 a barrel, the U.S. seriously looks for an alternative. This doesn’t necessarily mean replacing oil, but it means replacing oil imports. The U.S. begins to look at alternative fuels, as well as, domestic oil production. Once this happens then they will no longer need Saudi Arabian oil and since that country’s economy is based almost 100% on that commodity you can calculate what that will mean for them.

It was refreshing to hear this honest assessment from the Saudi prince. This is the type of transparency the industry needs. In fact, every industry could use this level of honesty. I see nothing wrong with wanting the price of oil at an acceptable level for the supply side and demand side. Although I do hope that we find a replacement for imported oil ASAP, it is good to see that more direct communication between oil producers and consumers is beginning to take place.