Cartel members cheat, and those outside the cartel are increasing production. Saudi Arabia would love to constrict total global production, but it can't, it can only shift production to others. It doesn't make any sense to try holding a price high unilaterally in a competitive marketplace.
People keep looking at the effects (Russia hurting, USA shale producers hurting) and trying to make those into causes. The explanation is simpler and far less interesting. High production and low production both suck for the Saudis, but high production currently sucks slightly less.
2 comments
[ 4.1 ms ] story [ 18.2 ms ] threadIt's simple game theory.
Cartel members cheat, and those outside the cartel are increasing production. Saudi Arabia would love to constrict total global production, but it can't, it can only shift production to others. It doesn't make any sense to try holding a price high unilaterally in a competitive marketplace.
People keep looking at the effects (Russia hurting, USA shale producers hurting) and trying to make those into causes. The explanation is simpler and far less interesting. High production and low production both suck for the Saudis, but high production currently sucks slightly less.
Prince Alwaleed bin Talal: http://www.usatoday.com/story/money/columnist/bartiromo/2015...
(I know, I know, it's USA Today. It's a shockingly good interview somehow.)