Although some analysts are puzzled by the Saudi strategy shift, pure economic logic
may well be driving Saudi behavior: As its competitors struggle to keep production
going, Riyadh is likely looking to increase its global market share—trying to avoid the
mistakes made during previous wild oil price swings. Keeping prices in the $50–
60 range for a year or two would have major repercussions. Investment in the U.S. oil
and gas sector declined by 37 percent last year and it could fall further there, as well
as elsewhere. More cheap gas could also increase consumption and make energyefficient
vehicles, as well as wind, solar, and nuclear power, less cost-competitive.
Reducing global competition now, then, might pave the way for steep price increases
in the future.
Although some analysts are puzzled by the Saudi strategy shift, pure economic logic
may well be driving Saudi behavior: As its competitors struggle to keep production
going, Riyadh is likely looking to increase its global market share—trying to avoid the
mistakes made during previous wild oil price swings. Keeping prices in the $50–
60 range for a year or two would have major repercussions. Investment in the U.S. oil
and gas sector declined by 37 percent last year and it could fall further there, as well
as elsewhere. More cheap gas could also increase consumption and make energyefficient
vehicles, as well as wind, solar, and nuclear power, less cost-competitive.
Reducing global competition now, then, might pave the way for steep price increases
in the future.
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