Among the oil market's many uncertainties, a variable receiving too little attention is the most important supplier.
Although Saudi Arabia ranks second behind Russia in production of crude oil and feels the third-ranking producer, the US, catching up, the kingdom still holds the commanding position for potential. It can, according to the International Energy Agency, produce 12.4 million b/d of crude oil. Of that potential, about 2.6 million lately has been idle.
No other oil-producing country has anywhere near that much spare capacity; most have none. Control over so much discretionary oil supply gives Saudi Arabia powerful leverage in international relations.
New competitive and geopolitical pressures on the House of Saud raise questions about use of that influence. How long, for example, will Saudi Arabia remain willing to keep 1.5-2 million b/d of production capacity idle for use in global supply emergencies? Might Saudi officials come to feel so militarily threatened by rival producers that they'd crush the oil market in self-defense?
Answers to these questions depend heavily on Saudi geopolitical thinking seldom on public display.
Helpful analysis
A helpful analysis emerged this month from within the kingdom. Abdulaziz Sager, a businessman who founded the Gulf Research Center, Jeddah, in 2000 and remains its chairman, notes on his group's web site (www.grc.net) how Saudi Arabia has adopted an uncharacteristically "activist position."
In his analysis, published by Arab News, Sager rejects suggestions that Saudi Arabia is abandoning its alliance with the US, pursuing a secular agenda in "an all-or-nothing ideological confrontation with Iran," or trying to "build a club of monarchies" to parry forces unleashed by the Arab Spring.
"Saudi Arabia's policy continues to be driven by the prerogatives of regional stability," he insists. So why the new activism?
"The lack of decisiveness by a key power such as the United States, as in the case of Syria, has underlined the notion that a quiet, low-key role was insufficient" in safeguarding Saudi interests, writes Sager.
The kingdom, he writes, has clear positions on specific hotspots.
In Syria, for example, Riyadh seeks regime change. Saudi officials believe humanitarian offenses will continue against Syrian civilians as long as Bashar al-Assad remains president.
"There simply is no solution if Assad stays," Sager writes. Because pursuit of a political solution without military pressure "is seen as a dead-end," the kingdom financially supports the Syrian opposition.
Saudi officials see similar problems in Lebanon. Riyadh has provided $3 billion to support the Lebanese army. The aims, according to Sager, are to sustain an institution important to stability and "to defeat the assumption that the Hizbollah militia has, and will continue to have, better lines of support from Iran."
On Iraq, the Saudi outlook is "largely pessimistic given that the US withdrew its forces before ensuring that the gaps in terms of lack of governance and institution-building were sufficiently filled," Sager says. But the kingdom won't support any militia inside Iraq "no matter what belief they might hold as it is well aware of the blowback this can produce on the kingdom in the near future."
On Iran, the Saudi view is optimistic, Sager says. But the optimism is qualified. The Saudis, Sager explains, see rapprochement between Iran and the US as "positive for the entire gulf region as long as both parties are sincere in the implementation of the agreement" on forestalling Iranian development of nuclear weapons.
And with Egypt, Sager writes, the Saudis prefer the military government now in control to alternatives under the Muslim Brotherhood or former President Mohammed Morsi. Egypt's future remains a question that official Saudi Arabia thinks it and other Gulf Cooperation Council governments must help answer with economic and other assistance.
Framework for decisions
None of this helps anyone predict the price of oil, of course. But clarity about official Saudi thinking in foreign affairs helps define the framework within which the kingdom will make future decisions about oil production.
For the rest of the oil-producing and consuming world, those decisions still matter greatly.
