Kemp: The Saudi Oil Enigma

Kemp: The Saudi Oil Enigma
Almost nothing is known about how Saudi Arabia's rulers reach decisions on political and economic reform, foreign policy and oil market strategy, according to Kemp.

John Kemp is a Reuters market analyst. The views expressed are his own


LONDON, Oct 14 (Reuters) - "I cannot forecast to you the action of Russia. It is a riddle wrapped in a mystery inside an enigma," Winston Churchill told his listeners in a radio broadcast in October 1939.

Much the same can be said about Saudi Arabia - one of the most compulsively secretive countries in the world at the start of the 21st century.

Almost nothing is known about how the kingdom's rulers reach decisions on political and economic reform, foreign policy and oil market strategy (or indeed about anything else).

Outsiders are strongly discouraged from enquiring into matters of long-term policy and how decisions are made.

The kingdom's rulers have a communications strategy, reaching out privately to friendly journalists, analysts and other opinion formers.

But for the most part it is deployed to shut down discussion and speculation they consider unhelpful rather than to convey or explain the context for long-term policy and strategy decisions.

In almost 20 years of writing about oil markets and the Middle East I have not come across anyone who could consistently offer a deep insight into the government's policymaking.


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Maisam Otoum | Oct. 14, 2014
Great article. It is magnificent how Supply/Demand work in such a harmony that no single economy player can manipulate production growth/decline to its interest.

Philippe | Oct. 14, 2014
OPEC goal in setting crude oil prices is two folds: First is to fetch as much as possible without causing an economic down turn in the western industrialized world. In other word set production in order to meet demand, making sure the price is high enough for a sustainable demand. Second: The Middle East economics is solely based on O&G production. There is no other commodity or industry that can possibly provide for these populations. Looking at the make-up of these populations, the thing that jumps at you is that the least populated have oil and the most populated do not have oil. The Saudis politic is to keep control on its population, but also to prop up politically “the have not”. To that end the Saudis are playing and important role in controlling the have not by, shall we say, philanthropy. The religion plays an important role; Iran without the nuclear bomb is under control. The Saudis can sustain a crude price in the $70s, this will make “the have not” tributaries of the Saudis which will become a better philanthropist. Iran with a large population will have a harder time to keep its population in check. Religion will play an important role; can the Saudis accept an Iraq totally under the thumb of Iran? The Saudis are the major player and will stay major player. The boots on the ground may be rented boots paid for by the Saudis.

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