Despite falling oil prices, the Organization of Petroleum Exporting Countries (OPEC) voted on November 27th not to cut production in order to boost prices. The key to this decision appears to have been the attitude of Saudi Arabia, which has long been the first among equals in the coalition. Not surprisingly, the decision led to further oil price declines, and led many observers to conclude that OPEC has largely lost the ability to upwardly influence the price of petroleum. But this determination ignores the wider geopolitical considerations that may be convincing Saudi Arabia to be perfectly content, for now, with lower prices.
With about 20 percent of the world's proven oil reserves and producing between 10 and 13 percent of the global oil usage, Saudi Arabia is the world's leading oil producer ahead of the U.S., China, Iran and Canada. Perhaps more importantly, with its developed and easily accessible oil fields, Saudi Arabia has some of the lowest "lifting costs" in the world. Some estimate that it only costs the Saudis less than $5 to extract a barrel of oil from its fields. This is stark contrast to the much higher costs in rival countries and offshore and of shale producers. This permits the Saudis to withstand a protracted price slump far easier than other countries. The Saudis can use this ability as a weapon to achieve its strategic ends. More>>
With about 20 percent of the world's proven oil reserves and producing between 10 and 13 percent of the global oil usage, Saudi Arabia is the world's leading oil producer ahead of the U.S., China, Iran and Canada. Perhaps more importantly, with its developed and easily accessible oil fields, Saudi Arabia has some of the lowest "lifting costs" in the world. Some estimate that it only costs the Saudis less than $5 to extract a barrel of oil from its fields. This is stark contrast to the much higher costs in rival countries and offshore and of shale producers. This permits the Saudis to withstand a protracted price slump far easier than other countries. The Saudis can use this ability as a weapon to achieve its strategic ends. More>>
Post a Comment