Oil could hit $200 if Arab unrest spreads to Saudi Arabia: CEBR

Crude prices will touch $200 a barrel if the Arab revolution spreads to Saudi Arabia, the Centre for Economics and Business Research (CEBR) said on Friday.

'... the revolutions around the Arab world have pushed up the price of oil which had temporarily stabilised at $116 yesterday. This is 38% above its average level for 2010. And if the unrest spreads to the Gulf states and Saudi Arabia, the price could rise to $200 easily, CEBR said.

However, irrespective of whether the unrest gobbles up Saudi Arabia or not, the oil policy of the world's largest exporter is going to change, according to Douglas McWilliams, chief executive of the London-based think tank.

He points out that Saudi Arabia has acted as a swing producer historically, using its reserve production capacity as a lever on price stability. Saudi Arabia has acted to prevent a price overheating, which could push the world into looking for alternatives, in which case oil producers' revenues will dry up.

If the ruling elite's outlook on the longevity of oil-based prosperity as well as their continuance in power changes, that could reflect in their oil policy too, according to McWilliams. One imagines that their expectation of the length of time receiving the oil revenues has been shortened considerably, in which case the optimal policy is to make as much money as possible while they are still in power, he says.