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Microeconomics Case Study

Case Title:

Saudi Arabia and Oil Prices: The Sultans of Swing

Publication Year : 2004

Authors: Pankaj Srivastav, G Srikanth

Industry: Oil and Natural Gas

Region:Saudi Arabia

Case Code: MBM0016

Teaching Note: Available

Structured Assignment: Available

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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

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