Tuesday, February 10, 2015

Saudi playbook for lower oil prices is obvious in retrospect

According to a piece in mining.com published in January 2013, the EIA's "Annual Energy Outlook 2013" appears to have given Saudi Arabia inspiration for their current stance on maintaining production in the face of lower oil prices:

The extra EIA oil projections are almost as much as Saudi Arabia currently pumps, leading to a scenario whereby for Riyadh, prices will have to fall to stimulate faster consumption growth while discouraging development of rival supply sources.

Given that pronouncement, the Saudi strategy of maintaining production despite lower oil prices hits a home run, by maintaining market share, stimulating oil consumption, and discouraging the development of oil sands, shale oil, and alternative energy. One example of increased consumption is strategic stockpiling of oil by China.

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