Before the Iraq war one year ago there were predictions that Saddam's overthrow would lead to an early resumption of Iraqi oil exports and a sharp drop in oil prices. Instead of dropping, oil prices have held steady and are predicted to go higher still.
Oil prices today are basically where they were one year ago. In New York, a barrel of crude is trading for just under $35. Some experts had predicted that prices would fall to $25 or even lower.
The same experts now say prices are holding firm because of rising demand as the world economic recovery gathers momentum.
A conference in Washington Tuesday examined the likely demand for oil and future price and supply trends, focussing in particular on Saudi Arabia, the biggest producer in the world as well as the country with the largest reserves.
But Matthew Simmons, an oil analyst and consultant, told the conference that Saudi production may not be capable of rising fast enough to meet increased demand. Mr. Simmons is dubious about Saudi claims that its old fields will continue to pump at current levels and he also doubts that vast new fields will be developed elsewhere.
"For some odd reason, we haven't really found past the 1960s anything outside that area [near the biggest Saudi fields] anything in the [entire] Middle East," he said. "Was it bad luck? Or is it like in the United States where for years we knew we had the big fields off the California coast. We knew we had west Texas. And a lot of people thought there must be something in between if we just drilled for it. Well, there wasn't."
A leading Saudi executive of Aramco, the biggest oil producer in the Middle East, strongly disagreed with this analysis. Mahmoud Abdul-Baqi, who is in charge of exploration for Saudi Aramco, says that Saudi Arabia will be able to keep pumping oil at a high level for many years to come.
"We have the potential to add more oil than anybody else," he said. "We can do that extremely successfully at a very reasonable cost. Our track record shows that we delivered for 70 years and we're going to continue delivering for another 70 years, at least."
Aramco officials say Saudi Arabia's reserves are far larger than those in neighboring Iraq, as Saudi Arabia alone holds one quarter of the world's known oil reserves. They say their production costs are as low as 70 U.S. cents per barrel.
Mr. Abdul-Baqi says Saudi Arabia can quickly boost output from the current 10 million barrels a day to 12 or even 15 million barrels a day and hold at that level for 50 years.