All the talk about Ethanol is what brought this about
Doubt it. It takes energy to produce ethenol. Where does that come from. A neighbor is a chemist for Amoco, and he laughs at the "ethenol panacea" advocates.
The Saudis are going to increase output to market their product to China, India, and Japan.
No, the lack of refining capacity in this country has helped bring this about. Instead of selling us the raw product, they can take additional profit on the refining as well. More jobs lost, more profit sent elsewhere.
Saying you are going to produce more oil and actually doing it are two different things. Especially when all of your large fields are 60 years old, and haven't been independently audited in over 25 years.
In the short term, this announcement will probably drive prices down. That is simply noise, however.
I fear that the longer term impact will be that alternative energy efforts will be reduced since "the Saudis can meet demand" will be the new mantra. At least until they come up short in 2009. By then, it will be much more painful to transition to other energy sources.