Microeconomics Case Study

Saudi Arabia and Oil Prices: The Sultans of Swing

OR

Abstract:
Crude prices hit all time highs in May 2004. As threats of oil induced – global economic recession built up, Saudi Arabian oil minister, Ali Naimi, proposed to increase OPEC (Organisation of Petroleum Exporting Countries) production by 2 million barrels per day, in an effort to cool the over-heated oil markets. However, as most other members were already producing above their quota limits, it fell upon Saudi Arabia, in its capacity as a swing producer, to ease supply pressures. The Saudi's, as controllers of a quarter of the world's crude reserves have a direct say in crude prices. But, some economists argue, Saudi Arabia's ability to swing prices might be dwindling.

Pedagogical Objectives:

To discuss the role of Saudi Arabia in influencing the oil prices and the production quantity of OPEC, inwake of the threat of an oil-induced global economic recession.

Keywords : Saudi Arabia and oil prices, Western Texas Intermediate, Oil economics, Brent International, International Trade & World Economy Case Study, Arabian American Oil Company (ARAMCO), Oil shocks, Yom-Kippur war, OPEC (Organisation of Petroleum Exporting Countries), Oil supply and demand, Commodity exchange, Basrah oil terminal, Price swings, Oil reserves, Crude oil production