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The US fears that Saudi Arabia, the world’s largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

 The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom’s crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.

That we are close to a peak in global oil production should not be a surprise to anyone (see World’s top energy economist warns peak oil threatens recovery, urges immediate action: “We have to leave oil before oil leaves us” and German military study warns of peak oil crisis and Peak oil production coming sooner than expected).

The bombshell is that the U.S. Embassy in Riyadh understands this and that it “now questions how much the Saudis can now substantively influence the crude markets over the long term.”  Who persuaded them of this is equally remarkable – Sadad al-Husseini, “a geologist and former head of exploration at the Saudi oil monopoly Aramco,” who says he isn’t in the peak oil camp but sounds on awful lot like those of us who are.

Consider the first cable, from December 2007:

 On November 20, 2007, CG and Econoff met with Dr. Sadad al-Husseini, former Executive Vice President for Exploration and Production at Saudi Aramco. Al-Husseini, who maintains close ties to Aramco executives, believes that the Saudi oil company has oversold its ability to increase production and will be unable to reach the stated goal of 12.5 million b/d of sustainable capacity by 2009. While stating that he does not subscribe to the theory of “peak oil,” the former Aramco board member does believe that a global output plateau will be reached in the next 5 to 10 years and will last some 15 years, until world oil production begins to decline. Additionally, al-Husseini expressed the view that the recent surge in oil prices reflects the underlying reality that global demand has met supply, and is not due to artificial market distortions.