[lbo-talk] Saudi Officials Seek to Temper the Price of Oil

Marvin Gandall marvgandall at videotron.ca
Sun Jan 28 08:36:53 PST 2007


Ian wrote:


> One of the problems with the hypothesis is that it is difficult to square
> with the fact that the Saudi elite have at least a considerable medium
> term interest in reversing the rather substantial decline in the standard
> of living of a large segment of their population, especially young people,
> as the intergenerational hand off of titles/privileges occurs. That means
> the high oil prices are an enormous boon to helping them ward off
> potential domestic unrest.
============================== That's the downside risk. The upside risk is encouraging oil consumers to search for new energy sources. That movement has clearly accelerated since the price of oil soared into the high 70s. To the extent the price can be manipulated by the Saudis, they have to be sensitive to the point at which it makes alternative energy sources competitive - a factor which weighs more heavily IMO than damaging Iran, though I wouldn't dispute they see the latter as an incidental - if somewhat more uncertain - benefit of bringing the price back down.

My sense is that this time the green train in the OECD countries may have well left the station because public alarm about global warming has become so much more widespread as its effects have become more visible while elite alarm has grown apace as a consequence of political instability and the potential for supply disruption in the major oil producing regions. I think the Saudis may be experiencing more concern about the impetus high oil prices have given the energy substitution and conservation movement in the oil consuming countries than about any additional revenue which has accrued to the Iranians.



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