Over the years, Saudi Arabia has been willing to cap extreme surges in the price of oil, deploying its power as the world's only swing producer. The Kingdom has roughly 2m barrels per day (bpd) of spare capacity, and has leveraged the ability to ramp up production on demand to stabilize prices in the past. Because of the calming effect this has had on the markets, calls for Saudi to pump more oil have grown increasingly loud in the present crisis. Nonetheless, the Oil Ministry has resisted the pressure, insisting that the markets are well supplied, and Saudi has made only token gestures of support for Western oil-consuming governments. Demands for more significant production increases have been generally ignored. In fact, King Abdallah recently announced that the Kingdom would stop developing big projects after the Khurays field comes on stream next year with 1.2m bpd, leaving the country's oil in the ground "for future generations".

In the main, Saudi would prefer to keep production at a rate which maximizes present returns, provided that an undersupplied market does not result in excessively high prices, reducing demand and encouraging the use of alternative sources of energy. Furthermore, high oil prices can drag down the economies of oil-producing nations as well, and interest rates in the Kingdom are already in the double digits.

In achieving this delicate balance, the preservation of Saudi oil reserves is a key consideration. The Saudis have in fact let their output fall from 9.5m to 8.5m bpd over the past two years, a move hidden behind the accession of Ecuador and Angola to the Organization of Petroleum Exporting Countries (OPEC), which boosted nominal supply. According to some experts, production at the main fields is already operating at close to the maximum prudent extraction rate. The large fields are very old, and rapid extraction risks doing irreparable damage. At the onset of the Iran-Iraq war, beginning in 1979 and for the next three years, state producer Saudi Aramco pumped a still-unmatched 10m bpd in a bid to dampen prices worldwide. Signs of structural damage and water seepage in the Ghawar fields caused major concern, and Aramco pulled back in the interests of conservation.

One reason for the Saudi reluctance to increase production can be found in the March bulletin of OAPEC, the Arab sub-group of OPEC, which notes that the Bush administration is aiming to reduce US dependency on oil imports "particularly from the Middle East", by 75 percent by the year 2025. "This has created some ambiguity in the US position on the future of oil consumption," it said. The Saudis are understandably concerned.

Saudi politely rebuffed Bush when he visited the Kingdom in January to ask for help in bringing down the price of oil. Bush again sought Saudi help in May. The price of crude had rocketed by over $30 a barrel since their last meeting, and Bush risked embarrassment by travelling again to Riyadh, hat in hand, but the political cost of doing nothing was too great. In response to his entreaties, however, Saudi agreed only to a fairly insignificant 300,000 bpd increase. The reaction from across the Atlantic, in its scope and intensity, was perhaps underestimated. As Congress threatened to block pending arms deals and media talking heads called for a blockade of the Arabian peninsula, Riyadh took steps to avert further damage in relations with its US ally. A further production increase was soon promised (the decision was made known in advance to a select group of oil traders and investment houses, in accordance with the Saudi position that a speculative investment frenzy is behind the rise in price). Initially, it was made out that the subsequent increase was to be 500,000 bpd, but officials conceded that the new proposal was on top of the previously announced 300,000 bpd. Markets were unmoved.