If only more people liked sour products (think crude, not candy), maybe Saudi Arabia wouldn't have taken an axe to its oil output. 

Much to cash-strapped consumers' dismay, the Saudis last weekend revealed that they slashed crude oil production due to what they see as a glut in supplies -- despite painfully-high gasoline prices.

The main reason behind the move, and confusing price action, appears to be a lack of global appetite for the sour blend of crude oil produced by Saudi Arabia and the intense desire for the light, sweet blend produced by wartorn Libya.

“There is a glut of supply of the type of crude that Saudis produce, but nobody wants: heavy crude,” said Phil Flynn, an energy analyst at PFGBEST and a FOX Business contributor.

At the same time, the Saudis may be quicker to defend high oil prices than in the past because they have promised to spend heavily -- approximately $93 billion in government handouts -- in an attempt to placate their angry citizens.

Others blame the role of speculators, saying Wall Street’s desire to get its hand on oil as an asset class is distorting the true demand for oil.

Sweet Versus Sour

The one thing most people are in agreement on is that the price at the pump has risen to levels that are hurting consumers and businesses like JetBlue (JBLU) and FedEx (FDX) alike.

According to AAA, regular gasoline prices are averaging $3.835 a gallon in the U.S., up from $3.791 a week ago and $3.548 a month ago. That’s not far off the all-time record of $4.114 recorded in July 2008. Gas prices were at just $2.862 a gallon at this time last year.

Consumers likely raised their eyebrows when they heard Saudi Arabia disclosed over the weekend it cut its oil output by 800,000 barrels per day last month due to oversupply.

“There is an element of truth to it, but they’re not giving full disclosure,” said Tom Kloza, chief oil analyst at the Oil Price Information Service. “The blends coming out of the kingdom don’t have much demand.”

Saudis produce what’s known as Arab heavy crude, a more sour blend of oil that is harder for Western refiners like Italy’s Eni (E) to clean. There is a greater need for the very high quality light crude oil produced by war-torn Libya, which has seen its oil production plummet by an estimated 66% due to the fighting there.

In an effort to offset the losses from the crisis in Libya, Saudi Arabia sold 2 million barrels of a special blend of crude that attempted to mimic its high-quality counterpart. Unfortunately for the Saudis, buyers were scarce.

So it’s not that demand for oil worldwide is too low. It’s that there isn't much desire for blends of crude the Saudis produce.

“I think they’re being a little bit disingenuous when they are saying there is not that much demand,” said Kloza. “It’s not sinister. I think they’re frustrated.”

In the past, the Saudis have been among the more forward-thinking OPEC countries, attempting to keep oil prices affordable so as not to cause demand destruction and promote alternative forms of energy. After all, if gas prices cross over certain thresholds above $4 a gallon, consumers and businesses are likely to lower their usage.

Role of Handouts, Speculators

“Last time we went above $120 [a barrel oil], we had one hell of a sloppy drunk spree and just an incredible hangover,” said Kloza, alluding to crude's plunge from $147 to just $30.28 in 2008 during the financial crisis.     

However, the revolutions toppling governments in Tunisia and Egypt and threatening Syria and Libya may have changed the thinking a bit in Saudi Arabia, which has to pay for the $93 billion in handouts offered by Saudi King Abdullah last month. The Saudis outlined higher welfare benefits,a higher minimum wage for state employees and $66.7 billion to spend on housing units.

“That type of money has got to come from their oil bottom line,” said Flynn. “They need to defend a higher price level than they did just a few months ago.”

Just to balance their budget in the wake of those spending increases, the Saudis are now facing a break-even price for crude of $84 from $68.50, according to a Bloomberg News survey this week. That 23% increase in break-even costs will likely be paid for by global oil consumers.

It’s more difficult to quantify the role of speculators, who are sophisticated investors that use high-leverage bets in hopes of capitalizing on future price movements. Kloza said demand from speculators – which can include hedge funds, Wall Street banks, index funds and commodity pools – has quadrupled since 2008.

“The physical market is amply supplied. The problem is oil as an asset class. That’s where demand is exceeding supply,” said Kloza. “As money rushes into commodities as an asset class, it sends the prices of these lifeblood commodities like oil and corn forever higher. It puts a lot of pain on the people in the middle of the business.”

Others point to more fundamental reasons for the high price of crude oil, specifically the turmoil in the Middle East and soaring demand from high-growth nations like China and India

“I think the speculation is way overblown,” said Flynn. “We are facing the greatest risk to supply since the oil embargo. Not only are we losing high quality Libyan oil every day, other nations in the region are ready to boil over.”

In any case, consumers may see a reprieve at the pump in the coming weeks as crude oil slumped 2.78% last week, snapping a three-week win streak and marking its worst performance since mid-March. It fell 2.32% to $107.12 on Monday amid concerns about Standard & Poor’s downgrading its outlook on the U.S. credit rating.

Kloza said May is historically a “really soft month” and “probably represents one of the best chances to get a break on gas.” He notes that crude tumbled to the mid$60s last May from $87, prompting gasoline to drop to $1.90 a gallon from $2.24.

“You can complain about gasoline prices all you want but if you go to the pump you can still fill up. That wasn’t true in the 1970s -- and that was before we had a futures market,” said Flynn.

Follow Matt Egan on Twitter @MattMEgan5