The Oil Market in the 21st Century. The Role of Saudi Arabia and OPEC in Shaping Oil Prices
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Uniwersytet Warszawski
Publication date: 2015-09-30
Stosunki Międzynarodowe – International Relations 2015;51(3):267-283
Since 1973, the prices in the oil market have been instable. This paper presents the state of the contemporary oil market. The author argues that the decrease in oil prices experienced in the second half of 2014 is a consequence of Saudi Arabia’s deliberate policy supported by Kuwait and the United Arab Emirates. These three countries strive to maintain their current share in the market and eliminate their competitors that have high production costs. The motivation behind their policy is anxiety about losing the market in the long term. This means a change in the policy pursued by OPEC, which traditionally took actions to maintain a certain price level. Saudi Arabia was perceived as a producer that adjusted supply to demand and this way stabilised prices – a swing producer. In the second half of 2014, Saudi Arabia and its allies did not take any action to prevent the price drop. Its attitude is consistent with the role of discipliner ascribed to it. The proponents of this approach argue that Saudi Arabia is willing to accept production exceeding the quotas for individual OPEC countries as long as it does not threaten its interests. In the event of excessive violation of arrangements or when the production of non-OPEC countries grows too much (in the opinion of Saudi Arabia), it is willing to risk a price war to limit the supply.
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