The crude oil soap opera from Saudi Arabia

Is Saudi Arabia these days ruling the world? If the crude oil gyrations and the global oil-talks are of any indications, the lives of most people on earth, especially those oil-addicted Western countries, are dependent on Saudi Arabia.It was just a few weeks ago that the Saudis had raised oil production by 300,000 barrels per day. Now the oil kingdowm is going to pump more oil to satiate the oil-hungry, inflation-hit nations.

That means the Saudi Kingdom’s total daily oil output is going to be around 10 million barrels.

But there lies the catch. According to Justice Litle, Editorial Director, Taipan Publishing Group, the whole world is going through the crude oil soap opera from Saudi Arabia

Read below a wonderful article written by Litle on the new oil game that Saudi Arabia is playing:

"The Saudis are playing a new game. In exchange for giving in to the pleas of fuel-addicted Western countries, they could be bringing some new demands to the table... like demanding a lowering of gas taxes to ease the cost of fuel.

This is an odd twist. Why would the supplier want to start dictating end-use terms to the buyer? It might not go over too well for the Saudis to start acting like the IMF, tying their favors to stern advice and policy prescriptions.

Western pols are used to bossing third-world countries around before deciding whether to give them money. They are decidedly not used to being bossed around themselves before getting more oil. If the Saudis do start pushing policy buttons, the move could backfire. It smells a little desperate, and suggests it’s not just the West that is sweating. The sheiks are in a tight spot, too.

The polite way to put it is that the Saudis, if not all of OPEC, are concerned about the health and well-being of its best customers. The impolite thing would be to compare the Kingdom to the leaders of a drug cartel. (Not an unprecedented analogy, as President Bush has openly spoke of America’s “addiction” to oil.)

It’s fitting, too, to note what happens when drug dealers don’t have enough high-quality product to meet demand. They have to sell a lower-quality product to meet the shortfall, or otherwise cut the “good stuff” with some low-cost agent to make it stretch further.

The junkies might complain about the drop-off in quality, but they still pay... after all, they have a habit to feed and no place else to go.

The comparison here is to the quality of oil that the Saudis will be putting forth. That extra few hundred thousand barrels -- if they are truly able to pump it -- will not be the light, sweet stuff that goes down so smoothly.

It is far more likely to be the heavy, sour stuff that takes a lot more work to process. When it comes to serving up the “good stuff,” even the Kingdom is maxed out.

Along with the other finger pointers, the Saudis are quick to lay blame at the feet of traders for the sky-high oil price. They repeat the same lines over and over like a mantra. “There is no shortage of oil. There will be no shortage of oil. This is just temporary.”

The motives for this reassuring talk are not hard to figure out. The Kingdom wants to keep its best customers happy and complacent in the short term... and as addicted as possible in the long term.

The worst nightmare for Saudi Arabia, and for all of OPEC really, would be for the Western world to suddenly get deadly serious about breaking its oil addiction. For this reason, high energy prices are a boon to OPEC but also a danger. The longer the oil price stays high, the ever greater buildup of Western political will occurs to actually do something about the problem.

The main reason oil prices are high, of course, is because the supply just isn’t there. Demand at the margins has overtaken regular supply.

We’re seeing a pattern of “demand destruction” now, in which Western consumers are finally cutting back due to pain at the pump, but that doesn’t cancel out the basic equation. The rise of China, India and the developing world has changed everything."

In poker terms, the Saudis are very close to shoving all-in on a bluff. They are still raking in the chips, but they know lady luck has left them. Over time, we can expect the “we’ve got plenty” rhetoric to look more and more detached from reality. That reality being that the Saudis are maxed out... and much closer to being tapped out than they or their customers want to admit.

The reality of “Twilight in the Desert,” as peak-oil expert Matt Simmons calls it in his eye-opening book of the same name, is hard to deny given the shape of things.

That means countless billions in profits for the major oil exporters today... but a whole new world tomorrow."