As long as they can keep stable production at least 500kbd below capacity and pump conservatively such that they have at least 1mbd of short term production capacity and last this is combined with various storage games Saudi Arabia should be able to overwhelm our oil storage systems and transport systems if needed. Combined with the SPR's in the US and China and coordination with consumer countries they should be able to hide a real oil shortage for one maybe even two years.

That would be contrary to all past evidence though, if I'm not mistaken. Post-peak nations have always pumped flat out, yes? Maximizing the economics. Poorer nations will be passed over first as well, which buys a year or two - someone should quantify this.

People will undoubtedly demand political solutions when peak is passed and shortages begin to appear; I think this would force KSA's hand in any case. They won't be able to coyly insist they're having pipeline problems darn it when talk radio is abuzz with demands to send in troops - or warheads - to seize oilfields.

I'd suggest that Saudi Arabia is fairly special in this regard. They also have substantial cash reserves outside of just oil and its very much a monarchy.

Certainly they have constraints they are stuck in WT exportland model and they have to ensure the local economy continues to grow to maintain power but they both don't have to pump at their maximum rate and they have such a draconian form of government that they can enforce slowing production.

This should be blatantly obvious just looking at their production history. Obviously they ran for decades well below capacity.

The key given my scenario is is Saudi Arabia stair stepping production down if they are then they peaked. The games they play on the way down just that games to stave of having to admit to peaking. Internally this is probably the most explosive issue that Saudi Arabia faces its not absolute production but if the populace becomes aware that Saudi production capacity is declining.

They will do everything they can in my opinion to ensure that they never look like they have hit the wall for production.
Buy buffering with spare capacity they can control the timing of production cuts to coincide with plausible announcements.

As far as 40 dollar a barrel oil being to low for Saudi Arabia.

http://www.energybulletin.net/node/205

Oil Hits $40, Doubts OPEC Can Fix Supply
by staff reporter

NEW YORK/LONDON (Reuters) - Oil prices bounced back to 13-year peaks above $40 on Tuesday on doubts that top world exporter Saudi Arabia's call for a rise in OPEC quotas would add much actual supply to a tight international market. U.S. light crude gained $1.17 to trade as high as $40.10 a barrel, the highest level since October 1990 after Iraq invaded Kuwait. London Brent crude was up over a dollar to $37.40 a barrel.

Saudi Arabia triggered a dollar slump in prices on Monday by proposing that the OPEC cartel raise official production limits by at least 1.5 million barrels per day (bpd) when ministers meet on June 3 to review policy.

Saudi Oil Minister Ali al-Naimi said the increase was necessary to cool sizzling oil prices that threatened to dent global economic growth. The cost of crude has jumped roughly 20 percent this year.

OPEC has come under strong pressure from major importing nations to bring down oil prices.

The International Energy Agency, which advises 26 industrialized nations on energy policy, welcomed the Saudi proposal but said the move was not enough to bring down runaway oil prices.

"I don't think it will be enough as it will be a long process to cool the market, but it's a first step and I am happy with this step," IEA Executive Director Claude Mandil told a news conference.

Obviously back in 2004 $40 dollar oil was considered expensive I cannot believe that Saudi Arabia's cost have risen dramatically over the last few years that they can't make money on 40 dollar oil. In fact they should be just fine in the 20-30 dollar range since they pumped a lot of oil at those prices.

If they really had what they claimed a 12mbd capacity and the ability to grow to 14mbd or beyond then what they should be doing is driving oil prices down into the 20-30 dollar range by opening the taps. This would play a big role in reviving demand and more importantly would smash the competition. They would have as much market share as they wished if they just drove prices down for a year or two. Longer term it would be a huge win for KSA and short term they can readily afford it.
If oil hit 20-30 then it would have to spend years over 100 before we would see real investment in expensive production.
The Saudi's could readily cut back from their "AWESOME" 12mbd and just the threat the would open the taps again would be enough for them to ensure they would get top dollar for their oil for decades to come.

They are not doing this instead they are passing on the one chance they have to take complete control of the worlds oil markets for decades to come.

Why ?

Because they can't instead they use the current situation to announce some more cuts to rebuild a fairly small spare capacity cushion so they can hide behind it to confuse their real situation.

Certainly they have constraints they are stuck in WT exportland model and they have to ensure the local economy continues to grow to maintain power but they both don't have to pump at their maximum rate and they have such a draconian form of government that they can enforce slowing production.

Draconian form of govt? How?

Lets see how they govern:

(1) No taxes at all
(2) No inflation at all, they have same prices now that they had in 1980s
(3) Very precise, well known and extremely stable laws. Consider for example hudood laws.
(4) Lowest crime rate in world
(5) Involvement in no wars to save people's lives
(6) Absolutely free health care from bottom to up and for everybody
(7) Free education
(8) One of the cleanest air and water
(9) Per capita income equal to usa and europe in terms of purchasing power (PPP)
(10) Budget surpluses. They never had a budget deficit.
(11) Absolutely no debts. They actually have a large cushion of cash which is close to their GDP
(12) A very stable and reliable govt
(13) A very deep pocket and fast hands when it comes to help needy people around the world
(14) All this in extremely little amount of work done per person

You americans and europeans think nobody other than you know how to rule the land. You think you are the best, you think whatever you do is the best and the only way to do things. You think all other on surface of earth have no culture, no wisdom and no ability to make use of what they have.

Total GDP of saudi arabia is just 120 billion dollars. They have a population of 20 million. Usa has a population which is 15 times higher but GDP of usa is 100 times higher. Therefore an average american is on average 7 times richer than an average saudi, but where is all this wealth? Even at a vampire level of taxation (28%+) usa govt is not able to provide any relief to the common man. Forget about relief usa govt is not even able to carry out its own expenses without foreign aid. Where the hell the money of usa goes? That is what you get when you follow a financial system that revolve around interest-based debt. Allah had clearly told in quran that whoever takes interest on loan should get prepared for a war with Allah and His prophet.

Usa govt takes a vampire level of tax plus a large amount of money in foreign debts plus tax its people with inflation (printing money) plus tax all people of world with inflation (printing money) but is still unable to provide any of the benefits that saudi govt provide to its people.

Saudi govt takes no taxes, not impose any inflation, not take any debts and yet is able to provide its people with free education, free health care as well as support 2 million hajis every year as well as provide a lot of help (in billions of dollars) to palestine, pakistan etc.

Who is better govt? Not hard to understand.

Another question for you to think is where the hell usa's money is going? Its not just wars. The costs of war are well known and is a relatively recent addition. The bulk of money is going somewhere else. First take a look at the amount of money:

Usa govt tax its people at a minimum rate of 28% though it also return some of the money later on (after eating interest on it for months). Lets say that roughly the amount returned is equal to the tax gathered above 28% rate so we reach a 28% level. Now add sales tax of atleast 7%. Add property taxes which I don't know is how much but lets say it takes 3% of GDP (i can guess its a very conservative estimate). Total all this and you reach a 38%. I know there are other taxes too but I don't know their rates and where they apply so I roughly say they are 2% of GDP. So altogether it makes 40% of GDP. At 12 trillion dollars it is 4.8 trillion dollars. This means per american 16,000 dollars. Yet usa take more debts every year.

In comparison, saudi per capita income is 6,000 dollars. Ofcourse govt can't consume it all, people have to eat, buy cars, travel, make property etc. Anybody who has spent time in saudi arabia can tell that a minimum of 1,000 dollars is needed per year per person to live. Ofcourse people are kept at a flexible level so lets say 2,000 dollars. The people high up in ladder demands higher salaries so lets say 2,000 dollars go there. We are left with 2,000 dollars. In my estimate the expenditure on health and education would not be more than 1,000 dollars per person per year. It is still 16.67% of GDP, I think the highest in world, yet is 16 times lower than the per capita income of usa govt. Yet saudi govt provide far better services to its people.

Did I miss something? Oh yes, its the expenditure on military. In saudi arabia it is a staggering 25 billion dollars per year. Oh, and they must be able to save a lot each year that they have such a high cushion and so many investments abroad. How are they able to manage it all in just $6,000 per capita GDP. Think about it. Its called barkat. Its called help from Allah. They are blessed because they have hijaz, the mecca and the medina.

Now, the crime rate. When usa has 7.3 million people in jails or on parole, three times its number of soldiers, saudi arabia has no people in jails except a few hundred of political prisoners. The very clean, practical and natural laws of islam ensure that punishments are strict enough to keep the crime rate close to zero. The amount of suffering a few dozen rapists get by being stoned to death per year is atleast thousands of times less than the amount of sufferings millions of rape victims will otherwise get and a few months prison multiplied by a few hundred thousand times. Still the islamic laws are not fully implemented that is why they still have a few hundred political prisoners.

Another thing about laws of saudi arabia is that they are not humanly made. They cannot be changed by humans. They are very stable, very precise and very well known. They are same for all and no judge can deny them. Not only that but the interpretation of those laws is not left to the judges as in the western judicial system. In an islamic court the interpretation of laws is also well known and well followed. Even a poor can expect equal treatment because there is no need of a lawyer, therefore the rich not get any superiority of a better lawyer. The judge himself knows what to ask and what to pay attention to.

Why on earth do you assume I think that the US is good or has a good government for that matter ?

You americans and europeans think nobody other than you know how to rule the land. You think you are the best, you think whatever you do is the best and the only way to do things. You think all other on surface of earth have no culture, no wisdom and no ability to make use of what they have.

Your comparing one crappy corrupt and horrible government with another.
I find both equally distasteful personally.
And I believe I have the personal right to find both disgusting.
If you don't agree with my belief that I have the right to dislike both would be difficult to discuss this further.

As far as Islam goes I happen to be 100% behind the decision to ensure the Koran is only in its original Arabic
however I don't know Arabic and the English translations are suspect to say the least so I really have no hope in getting involved in any good argument about Islam. In fact I recently pointed out that Christianity probably made a terrible mistake by not keeping the original texts in the original language readily available and teaching people to read them.
I'm not the worlds ultimate religious scholar and I found that the English translations of the Koran where very difficult to understand so I can't comment on Islam nor am I a good study of Christianity since I cannot read the original Greek and Hebrew texts. However since your effectively brought up the concept of law derived from God not man I can say even with my limited understanding I don't see that these to religions differ substantially in fact I think I could show you different Christians sects that have larger differences than between the Moslem religion and a particular Christian sect.
This extends to what both interpret and laws from God not man. If you expand to include the two religions over time the argument is even more compelling and you can readily find by comparing across time that strikingly similar communities developed regardless of the underlying religion.

I can offer that in my opinion the Mennonite branch of Christianity and Islam as I understand it from the Koran have a lot in common. http://en.wikipedia.org/wiki/Mennonites
Many from this group happen to live in the US and Europe which strikes a bit of a blow to your generalization.
Also I'd offer that my viewpoint on life if you will is much closer to theirs then other groups in the US.
And I'll let you know that I spent many summers as a child living with Amish in Missouri.
And last but not least I'd offer that my dislike of both the Saudi culture and general US culture is based on what I learned living with the Amish.

And last but not least I'd offer that just as the Amish live in the US and don't fit your preconceived notions of how Americans and Europeans think I'd offer that I'm certain that my generalization about Saudi Arabia is not generally true.
But I'm quite willing to concede that the majority of the people in our culture and especially our rulers are seriously messed up. As far as Saudi Arabia goes no way I can say I'd have to live there to determine what the real majority viewpoint was. You simply can't tell from the outside. I feel they are messed up because my own beliefs in personal choice are at odds with what I know about Saudi Arabia. My opinion is its very difficult for someone from Saudi Arabia who is unhappy with how the government and culture work to leave or find a subculture that better suites them.

Thus my dislike for Saudi Arabia is focused on and interpretation of the Koran which I freely admit I simply don't have the skills to make on my own.

Women considering relocating to Saudi Arabia should be keenly aware that women and children residing in Saudi Arabia as members of a Saudi household (including adult American-citizen women married to Saudi men, adult American-citizen women who are the unmarried daughters of Saudi fathers, and American-citizen boys under the age of 21 who are the sons of Saudi fathers) are considered household property and require the permission of the Saudi male head of their household to leave the country. Married women require their husband’s permission to depart the country, while unmarried women and children require the permission of their father or male guardian. The U.S. Embassy can intercede with the Saudi government to request exit permission for an adult American woman (wife or daughter of a Saudi citizen), but there is no guarantee of success, or even of timely response. Mothers are not able to obtain permission for the departure of minor children without the father’s agreement.

Vs this probably overly broad interpretation.
http://women.rationalreality.com/

"And among God's signs is this: He created for you mates from amongst yourselves (males as mates for females and vice versa) that you might find tranquillity and peace in them. And he has put love and kindness among you. Herein surely are signs for those who reflect (Koran 30:21)."

Surprisingly egalitarian in its approach, the Koran doesn't agree with the Bible's claim of men being owners of women, neither does it agree with women being created for or from men [as the Bible claims], nor does it say that women cannot teach nor have authority over men. The Koran also dispels the common myth among other religions in general that; a woman is evil by nature and has been created to deceive mankind. The purpose, says that Koran, of mates is that tranquillity and peace emerges through the natural instinct of love and kindness among mates.

People who analyze the Koran however sometimes feel different about many of its verses, which to them suggest that the Koran is in some way putting down women. These verses are a handful and given the nature of this paper we can go in detail with them.

The verse in the Koran that causes trouble to most liberals and is misused by evangelical Christians is:

"Men are the protectors (Qawamoon) of women, because God has given preference to some over others. And because men spend of their property on women. So good women are obedient, guarding even unnoticed that what Allah (God) has asked them to guard. As for those from whom you fear rebellion in this (i.e. guarding their chastity in your absence), i) talk to them, ii) leave them alone in their beds, iii) strike them. If they then obey you, look not for any way against them.. (Koran 4:34)."

The verse in question is quite clear if we don't jump to hasty conclusions. Men have been given the duty to protect and support women. God has given preference to one gender over another in certain duties. Men have been given preference in being the providers of women and women are given preference in caring for a child. Even if divorce separates a man from his wife, he has to seek her help in caring for the child or another female if the mother agrees (Koran 2:233). Men are told to spend of their property on women and not ask the woman for anything even if she happens to be rich.

Now to the controversial part: The verse asks women to guard even when unnoticed, that which God has asked them to guard. If we have read the Koran carefully, we won't have trouble in determining that God specifically asks women and men to "guard" their chastity (Koran 24:30-31). To the women who cheat on their husbands, the Koran gives a three step, braking mechanism to hasty divorce or worse still capital punishment for adultery.

I might add I think the second interpretation may be a bit overboard vs what the Koran really says. And I don't care much for this taking of verses out of context for any reason. Regardless my underlying belief is that a person should always be free to leave any situation if they wish. This does not say that they are free to go without reasonable repercussions such as taking care of their children or resolving joint property issues etc but this is a civil/code law matter not a freedom matter. I'll add that the whole status of Women and property is a big issue inside the Islamic community so you can't accuse me as and outsider of bringing up something thats settled and well understood.

I'm simply saying that I find this single interpretation of the law to be sufficient for me to dislike Saudi culture.
At the minimum a women should be able to go to a cleric to determine if the man failed in his duties to his wife or vice versa.

The problem is simple the husband himself may not completely understand both his rights and responsibilities under the Koran and Sharia law. Although I don't know Islamic law that well but to my knowledge nothing prevents anyone from seeking the advice of and ruling of a cleric on any aspect of the law.

Next moving to the US in general our problem is far more serious. For Saudi Arabia it was a simple matter of the choice to leave for the US its worse. We have for some reason decided that we deserve to rule the world as we see fit. In general.
And we have the weapons and power to basically do as we please. Only the thinnest veneer of civilization keeps us from degrading to be as bad as the worst regime you can imagine. You mention some of our excesses but I'd suggest you missed a lot more. Our sickness runs much deeper then a interpretation of a few verses that causes real problems for some people who live with others that don't fully practice all the laws of their religion. I'd argue that the problems in Saudi Arabia is a simple matter of fully enforcing all the Sharia laws with balance. My understanding makes me believe that if you followed the code in a balanced manner then abuse by people ignorant of their own laws and religion would not happen.
This is completely and utterly different from the sickness thats infected the US. We have thrown out any attempt to balance any laws in favor of simple greed. Not only have we rejected our religion but we have undermined even our civil and moral codes of laws that give us our freedoms and responsibilities. I'm not talking about things like abortion and homosexuality which are side issues at best and generally totally irrelevant these are red herrings. At some point in the progress of western civilization we like the Romans our culture descended from threw out the the basic concepts that makes a real democracy work in favor of one based on greed.

Regardless any culture that chooses to strip its members of the chance to choose has taken the wrong path. I actually don't disagree with you overall viewpoint. I'll argue that inside our western culture that we still have enough freedom that more and more people are choosing to reject our vile decision to be rulers of everything. I can't say it will be enough to make a difference the rot is deep. And as far as Saudi Arabia itself goes it does seem to be slowly moving to take care of the abuse problems that have crept into its culture and as I said I think the problem although real can be fixed within the constraints of the culture. Ours is a bit more problematic and in my opinion require rejection of our current culture for the most part and building a new one based on the best bits from older variations. This includes for example embracing the Sharia banking laws from the Moslem culture. We had quite similar usury laws in the past but they where forgotten.
http://en.wikipedia.org/wiki/Usury

The underlying revulsion to usury in the past turned out to have a very sound reason and we are finally seeing the effects today. I think now we have finally reached the point that the problem of usury in a society thats not capable of real growth have become obvious. Without growth or minimal growth usury becomes a serious problem fast. I also suspect you can easily see that Western society has one hell of a serious problem. In fact our past problems with usury provide the underpinning for the eventual Nazi killing of the Jews in Europe on top of a long string of atrocities. Our lack of Sharia like banking laws seems to have repeatedly brought out the worst in our culture. The latest variant is a final orgy of excessive credit and greed but its been a problem for our culture for centuries. And last but not least our addiction to usury which eventually resulted in the Nazi's also caused the long centuries of generally good relationships between the Jews and Moslem's to be broken with the establishment of Israel. I don't want to expand on this but simply to point out that underlying a lot of the problems in the world today are the historical problems that Western/Christian society seems to have with money. Our weakness for money can often be found to be the heart of a enormous number of problems for centuries. This hopefully gives you some idea of how deep our sickness is and its not clear that our culture can or should survive for much longer with this sickness its probably time for it to reinvent itself and cure this disease.