Saudis decide to play Chamberlain
June 14, 2008
– Comments (14)
The Saudis act like a timid gangster who pulls out a knife only to have second thoughts and put it back. This never works on the streets of Chicago, and it won't work in the US-Saudi ralationship either.
The Saudis had two options. One was keep the price under $20 and hope consumers will never move to develop alternative technologies becuase $20 is so cheap. The other was to hike prices to the maximum and hope to earn enough windfall profits before Americans, Chinese, Europeans, Japanese, etc. put a solar panel on every roof and sidestep the Saudi oil altogether. Instead, they chose the third option: go for Option 2 but give away the profits.
How do they imagine it's going to play out? Do they really think if they lower the price to $100, the Americans will stop solar research, solar companies will shut down, and they'll be selling oil for $100 forever and be very happy? That's naivete raised to an exponential power. Once you raised your price above $20, there is no going back. People have made up their minds to find an alternative solution and kick you out of the market at the first opportunity. If you try to appease them with $100 oil as opposed to $130 oil, they'll say "thank you" and continue to develop alternative technologies at the same breakneck pace as before. You can collect $130 for the next 10 years and starve then, or you collect $100 for the next 10 years and starve then, but you cannot escape the worst-case scenario by appeasement, as Chamberlain found out. What the Saudis decided to do is the equivalent of giving away Sudetenland to avoid war. Of course it's the surest way to fail on bouth counts, but after all, the main lesson of history is that people don't draw lessons. Stupid, stupid Saudis.
http://biz.yahoo.com/ap/080614/saudi_oil.html
RIYADH, Saudi Arabia (AP) -- Saudi Arabia's oil minister on Sunday will address reports that the world's largest oil-producing country is set to raise production by about 500,000 barrels per day, his adviser said.
The increase would bring Saudi Arabia's oil production to 10 million barrels a day, the country's highest ever, according to reports by The New York Times and the Middle East Economic Survey, an industry publication.
Adviser Ibrahim al-Muhanna told The Associated Press on Saturday that he could not confirm the reports, but added: "Minister Ali al-Naimi will clarify this tomorrow."
Saudi Arabia has called for a meeting of oil producing and consuming countries on June 22 in the port city of Jiddah to discuss ways of dealing with soaring energy prices.
The New York Times report on Saturday, citing unnamed analysts and oil traders briefed by Saudi officials, said the production increase was to be announced following the meeting.
The Middle East Economic Survey said Friday that Saudi Arabia was considering a production increase, but did not provide a source.
The Saudis are concerned that sustained high oil prices will eventually slacken the world's appetite for oil, affecting them in the long run.
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