Yossi Mann (Bar-Ilan University, Ramat Gan, Israel) “The Saudi Arabia’s New Oil Policy”

Abstract:

During 2015 the oil market experienced an extreme fluctuation. This fluctuation reflects the uncertainty that currently exists in the oil industry. It is an industry truism among policy makers, researchers and consumers alike that the price of oil represents the interests and needs of the “oil states”, the members of OPEC, and especially those member states from the Middle-East. The OPEC members share the notion that low oil prices are detrimental to all member states. Therefore, it is expected of them to cooperate and decrease pumping rate in order to once again increase the price of oil. The United States is closer than ever before to energy independence. Geopolitical events are moulding the oil markets. This lecture wishes to refute these presumptions and claim that they are no longer valid as a tool for analyzing the oil market and hence are found to be irrelevant in the post-“Arab Spring” era.

In their place we seek to present new assumptions. The price of oil that is assumed to be a true budget indicator for OPEC member states, especially for the budgets of Saudi-Arabia, Iran, Iraq, Kuwait, and Libya, is no longer relevant.  The price of oil does not reflect the interests and needs of the OPEC members. OPEC’s influence on the actual price is very limited. The old way of cooperation among member states is gone; in its place a new “only the strong survive” rivalry has emerged. The United States is not expected to achieve real energy independence in the near future. At an age of sophisticated free markets, the true influence of geopolitical events, excluding a rare “clear and present danger” kind of threat on the oil market, are limited in their effect.

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