Excerpted from Smarter Every Day:

I never thought I'd see diesel for $π again! Oh, and gas under $2 is cool to. Thank you, geopolitics. The Saudis are keeping production high. There could be several reasons for this. The main reason is thought to be that they want to maintain control of the major oil supply infrastructure. If the price of oil goes too high, others will be able to make money selling it, then these competitors will be able to build up their own infrastructure. The OPEC nations are making an investment in their future by trying to kill future competition. They kill future competition by never allowing it to grow in the first place. It's a pretty interesting economics problem if you ask me. You limit FUTURE supply by flooding PRESENT supply. Whatever their reason for doing it…. it's pretty clever.

Gibbons Burke writes: 

I don't think the Saudis could do this sort of thing on their own without it serving some other political rationale which serves some sort of United States strategic interest. It would be too nakedly an act of economic war on the U.S. oil producers whom are providing enough supply for the U.S. To become more self sufficient for oil needs, even to the point of becoming a net exporter.

The only way the Saudis could make this happen is if they had the approval of the White House, and the White House couldn't and wouldn't attack its own domestic producers unless it had a treasonous animosity to its own corporate energy producing infrastructure (which it seems to have), and could justify allowing the Saudis to squeeze our balls in the name of doing the same thing to Boris Putin for his Ukranian hegemony and intransigence.





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1 Comment so far

  1. Gregory Rehmke on January 6, 2015 10:35 pm

    I think the Saudi knew that if they cut production to keep prices high, that would just continue to fuel shale oil expansion in the U.S.


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