Kemp: Oil Prices and Saudi Diplomacy

Kemp: Oil Prices and Saudi Diplomacy
Saudi Arabia sets oil market policy purely on an economic basis, no less and no more, the kingdom's oil minister reiterated in a broad-ranging interview with the newspaper Al-Hayat.

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


LONDON, Dec 22 (Reuters) - Saudi Arabia sets oil market policy purely on an economic basis, no less and no more, the kingdom's oil minister reiterated in a broad-ranging interview with the newspaper Al-Hayat.

Ali al-Naimi rejected "conspiracy theories" that Saudi Arabia was using oil as a diplomatic weapon against Iran, Russia or any other country, calling such beliefs a misunderstanding, tendentious and a fantasy without foundation.

Naimi was countering widespread suggestions in the Western media and think tanks that the kingdom had deliberately caused the price of oil to collapse in order to weaken its adversaries in Syria, Iraq and Iran.

But is there really any evidence to suggest the kingdom's top policymakers have deliberately sought lower oil prices? Or has Saudi Arabia simply responded to events beyond its control by selecting the most sensible strategy from a range of unappealing options?

We will never know the answer for certain. Saudi oil policy is set by the minister alone in consultation with the king and a tiny group of senior princes. Access to those discussions is severely limited. Those who know tend not to talk, and those who talk tend not to know.

Nonetheless, there are good reasons to doubt the kingdom is wielding the oil weapon as part of some grand "geopolitical strategy" either on its own or in conjunction with the United States.

In his newspaper interview, Naimi blamed falling oil prices on the global economic slowdown, rising production from outside OPEC, the spread of misinformation, and speculators.


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Ekomobong Ekanem | Jan. 23, 2015
The Saudis are conniving with the US to play politics with oil price, period.

Husnain Khan | Dec. 26, 2014
Extremely good article giving a balanced view on the possible reasons of falling oil prices. A lot of people now a days seems to believe that there is some sort of conspiracy behind the falling oil prices but the writer has very correctly said that there are no proofs to substantiate this and even if this is the case, the final outcome most likely will be determined by many complex market scenarios which cannot be controlled.

Philippe | Dec. 24, 2014
Very interesting article well thought of article. None the less the power of Saudis Arabia is based on the oil, not so much gas. Undeniably the power of Saudis Arabia, within the Islamic world is the guarantors of the Muslim faith, the Sunni interpretation of the Muslin faith. The Saudis competition within the Muslim world is the Shia theology, Iran been the propagandist of this interpretation. We as outsiders do not understand the confrontation at hands. The leverage Saudis Arabia has over Iran is it oil production. Should Iran be a nuclear power, Saudis Arabia will lose any leverage on OPEC; the Iranian would dictate the OPEC production policy by just having a nuclear threat understood. Iranian leader are much more fanatic and power hungry, the Middle East and Israel will never be the same. For the US, the crash of oil price is welcome. It is another economic problem Iran has to deal with. For the Russians the same, they have chosen the wrong side of this religious war. The Russian have placed an important strategic place in keeping their naval base in the Mediterranean Sea in Syria. The Russians have limited access outside, the Pacific north, Vladivostok, the artic sea, shut down 5 month a year an ice, and the Black sea. For the present US government this situation means dealing with two enemies without lifting a finger. The Saudis are not primarily having their sight on the US fracking producers, it is a collateral gain.

bert stahr | Dec. 23, 2014
The top 10 biggest oil fields in the world contain an ESTIMATED 312,300,000,000 bbls. World daily usage is 92,000,000 bbls/day=9.25 years of supply at the current rate. Then what with about half the worlds existing known supply gone? Check replacement cost/bbl. for conventional oil. This oil punch up is 100% political. Saudi needs between $85-$95 to remain viable. At $50/bbl Russia is better placed and will last at least 5 years, Saudi maybe 3. If OPEC cut production by 10 million bpd there would be a savage oil shortage because the rest of the producing world doesnt have the infrastructure to deliver even if they wanted to. Prices would hit $200/bbl + and OPEC would make 3 times as much revenue by dropping production by a third. So its 100% political because only a lunatic would overproduce at a huge loss of a finite resource to keep "market share" and only an idiot would believe this story.

ABS | Dec. 23, 2014
I think its rather naive to place your trust solely on evidence and assume everything else is pure speculation. It would be ideal to have motives and reasons spelt out about everything, however that is very rarely the case. Its rather perplexing you are prepared to accept the word of Yamani as evidence that his huge selling strategy in the 86 meltdown was not politically motivated. And in an increasingly complex world, especially with the heightened political tensions between the two Middle Eastern superpowers (Saudi and Iran), it is even more difficult to decipher the truth. It would be rather silly to just take the statements of the statesmen as the only valid form of evidence and not reflect on any deeper motives. There cannot be purely economic motives here, there must be political ones too. It is even more unhelpful to assume otherwise.


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