Nov

19

 You have to admire the diplomacy, sagacity, and self interest of the Saudis. All that's missing is that they're trying to increase their profits to "save the environment and prevent climate change".

Saudi Arabia Will Support Stability in Oil Markets: Crown Prince

By Wael Mahdi Nov. 15 (Bloomberg)

– Saudi Arabia will continue its balanced policy and positive role to support stability in international petroleum markets, Crown Prince Salman bin Abdulaziz Al Saud says at G-20 Summit in Brisbane, according to state-run Saudi Press Agency.

* Says Saudi Arabia will take into consideration the interests of producing and consuming nations
* Saudi Arabia invested in spare capacity to support stability in global energy markets therefore supporting global economy growth
* NOTE: Oil-Price Rout Seen Deepening by IEA as Pressure on OPEC Mounts
* NOTE: Saudis Reject Talk of OPEC Market Share War as Crude Tumbles
* NOTE: OPEC Diplomacy Picks Up From Iraq to Libya Amid Oil Plunge

Anatoly Veltman comments: 

Anyone privy to a study of how each oil-producing nation has or has not invested in spare capacity in the years of $100 windfall prices? Why windfall? Well, yes, if the world operated decades at $ 20-30, then of course recent decade of $ 70-140 should have been viewed a windfall. I wonder if similar study has been done on gold producers, who until 2000 managed to stay in business at $ 300-400 but then reduced/abandoned their hedging programs as price jumped over $ 500 and all the way to $ 1,900…Silver producers who lived on $ 4-5.50, but didn't all duly appreciate the windfall of $ 18-49…Copper producers, who lived most of their lives below $ 1.00, but then treated $ 3-4 as a new normal. 


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2 Comments so far

  1. Anonymous on November 28, 2014 1:17 am

    When you print more currency(paper or electronic), each unit of the currency is worth less. That means you need more of it to purchase the same item as before. Some people call this inflation, others previously called it depreciation of the currency. That to a large extent explains the increase in price.

    However, sometimes production increases or demand decreases making more of it (petroleum)available…that might lower the price.
    If however, demand increases or production goes down that would increase the price.

    Over time, you have changes in demand and/or production, and also the quantity of currency. It seems everything is in order.

    The words “excess profits” or “windfall profits” or similar phrases are excellent slogans designed to achieve political motives. The term ’speculators’, ‘unions’, ‘cartels’ etc. also work to mask political ends.

    Have a great day!

  2. Joel Friedland on November 29, 2014 12:22 pm

    Nearly all viewed the windfalls as indications of a “new normal”, not as windfalls.

    In 1991, I went to a cocktail party held at the Plaza celebrating CitiBank divesting 10% of its investment in the Citibank sub in Saudi Arabia. Citibank was compensated for the stock via an involved transaction. Saudi Arabia wanted to expand exports — other than oil. Oil was not at windfall prices then.

    What does Saudi Arabia have more of than practically anywhere else? Sand. Sand went to India to be used for cement and to Indonesia for glass, Kenyan copper, and Australian bauxite were all traded in and all around and somehow CitiBank got paid.

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