Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

AI Summary. Saudi Aramco scrapped plans to raise production capacity to 13mm barrels a day from 12mm, a cancellation expected to save $20–40bn in capital spending over five years and signaling insufficient demand for additional Saudi oil. Saudi Arabia, pumping about 9mm barrels a day under OPEC+ cuts, appears set on lower output to support higher prices.

Javier Blas Bloomberg
Date Posted:

Saudi Aramco abandoned a $20-40B plan to increase capacity to 13mm bpd from their current 12mm bpd as the US takes on the role of the world’s marginal producer. @JavierBlas

Saudi Aramco abandoned a $20-40B plan to increase capacity to 13mm bpd from their current 12mm bpd as the US takes on the...

Does scrapping Saudi capacity expansion signal insufficient demand for its oil?

Core argument: Saudi Aramco scrapped its plan to raise production capacity from 12mm to 13mm barrels a day, a cancellation likely to save $20–40bn in capital expenditure over five years.

Saudi Aramco abandoned a plan to boost its production capacity to 13mm barrels a day, from 12mm barrels currently. Due to OPEC+ output cuts, Riyadh is well below its maximum output potential, currently pumping about 9mm barrels a day. The cancellation will likely to save Aramco somewhere between $20-40 billion in capex over the next five years. By scrapping the expansion plan, Riyadh has conceded what was already an open secret: There’s insufficient demand for so much extra Saudi oil in the foreseeable future. Riyadh appears determined – or resigned – to keep production lower-for-longer to keep oil prices higher-for-longer. Only if the kingdom were ready to accept much lower prices there would be demand for extra Saudi oil because, over time, investment would drop elsewhere, notably in the US shale industry. Saudi Arabia’s problem is that high oil prices encouraged – some would even say subsidized — surging production elsewhere, from the North Sea in the 1980s to the American shale basins in the 2020s.

Takeaways by Macro Roundup® AI

  1. Saudi Aramco scrapped its plan to raise production capacity from 12mm to 13mm barrels a day, a cancellation likely to save $20–40bn in capital expenditure over five years.
  2. Saudi Arabia pumps about 9mm barrels a day, well below its maximum potential, due to OPEC+ output cuts, and appears determined or resigned to keep production lower-for-longer to keep oil prices higher-for-longer.
  3. High oil prices encouraged surging production elsewhere, from the North Sea in the 1980s to the American shale basins in the 2020s, and demand for extra Saudi oil would emerge only if Riyadh accepted much lower prices.

Related Articles:

  • US Shale: The Marginal Supplier Matures — The responsiveness of US oil supply to prices has declined and is estimated to be much smaller for publicly traded producers than private ones, with a 10% price increase raising US liquids output by roughly 1%, or 200,000 barrels a day. That implies US supply would offset only about 20-25% of a geopolitical supply shock.
  • US Oil and Gas Boom Doesn’t Feel Like One to Workers — US oil and natural gas production has been setting records, yet industry employment is 128,700 below its mid-2014 peak and 41,200 below pre-pandemic levels, with job gains stalling after rising from an early-2021 low. Productivity in the US oil and gas industry has risen dramatically.
  • Oil Market Caught By Surprise As US Output Surges — US crude oil production reached an all-time high of 13.2mn barrels a day, more than any other country and about one in eight barrels of global output, outpacing official forecasts. The International Energy Agency attributes 80% of this year's growth in global oil supply to the US, complicating OPEC+ efforts to prop up prices through output cuts.
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