Comment by patio11 | Hacker News Reader

Comment by patio11 | Hacker News Reader

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Did anyone ever predict Saudi Arabia would actually reduce the price of oil as a method of economically attacking it's enemies?

There exists academic literature suggesting that oil producing states would, if threatened with technological change which had the possibility of making oil obsolete, respond by flooding the market with cheap-as-water oil with the twin goals of a) killing or delaying the new tech (newly irrelevant because, hey, it is now 100x more expensive than existing technology per unit of energy) and b) transferring as much from their below-ground Swiss bank accounts to their above-ground Swiss bank accounts before their nations collapsed.

If you've got a friend who did policy debate back in college, ask for their files on "backstopping."

My economics lecturer did a memorable talk on OPEC back in the day.

His thesis was that groups such as OPEC are ultimately self defeating. I think it was related to game theory.

Basically : OPEC members are made up of states with varying levels of oil reserves. Those with small reserves want to restrict supply to drive the price up, so they can maximise the amount they get for their reserves before they are exhausted.

Those with much larger fields (ie, Saudis) do not want to drive the price up too much, because this encourages other extraction methods (ie, Oil Sands, Deepwater Extraction) as well as encouraging uptake of alternative energy sources (ie Electric Car development, natural gas, biofuels).

As each OPEC member has differing goals and differing timeframes, eventually OPEC will become a toothless tiger that individual nations openly disobey.

I must say in the 10 years since that time, while his eventuality hasn't come about (OPEC is still together) much of it has come true. It certainly isn't the feared group it was 30 years ago.

There is also incentive for OPEC nations to cheat on their quotas. Told they can only sell X billion barrels of oil, they in fact sell X+10% billion barrels to get that extra slice of pie for themselves.

Sounds difficult -- the oil wells of Saudi Arabia can only produce so much oil per day

Ah, but how much is that, exactly? And is that amount publicly known?

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