Having long experience in oil markets, Saudi Arabia is a rational player. So when OPEC’s new president, Chakib Khelil of Algeria, signaled no interest in hiking production to cut prices because $100 crude “is not necessarily very high,” big producers were effectively saying there’s nothing out on the horizon that could stop them.
As high as oil prices are, they must be thinking, the U.S. is obviously willing to pay them. How else to explain the unwillingness of its politicians and public to increase domestic production, one slam-dunk move that would bring prices down.
OPEC, and Saudi Arabia, which can produce oil very cheaply no matter what the world price, will lower prices if they can raise the comparative costs of offshore drilling to preserve its monopoly. But right now they have no reason to do it.
“How else to explain the unwillingness of its politicians and public to increase domestic production, one slam-dunk move that would bring prices down”
What a piece of claptrap!
Oil is bought and sold in a GLOBAL market. The United States accounts for something like 25% of world oil consumption, 10% of production, and 2% of proven reserves.
Let’s say the United States increased its oil production by 30%. This is exceedingly unlikely, since U.S. oil production peaked in 1970, but let’s say it happened anyway. Would U.S. oil prices plunge? Not on your life. The world supply of oil would increase by 3%. If everything else in the world remained unchanged (including Saudi production and Chinese consumption), oil prices would decline slightly. So much for super-duper, slam-dunk price-slashing.
PS: Increasing U.S. production by 30% would reduce the number of barrels imported but would not necessarily save Americans money. That would depend on how the cost of domestic production (including any government subsidies) compared to the cost of imported oil.