These falling oil prices, are here to stay! Long toil ahead.




Call it the Saudi calculus.
Oil prices were already
plummeting 14 months ago
when, at Saudi Arabia’s
insistence, OPEC put the global
petroleum industry on notice:
The member countries would
not try to prop up prices by
cutting production.
“We don’t want to panic,”
Abdalla el-Badri, secretary
general of the Organization of
the Petroleum Exporting
Countries, told reporters at the
group’s November 2014
meeting in Vienna. “We want to
see how the market behaves.”
Since then, the market has
behaved in a way few could
have predicted — including
Saudi Arabia, the world’s
biggest oil exporter. The price
of oil has collapsed under the
weight of a growing
international glut, made worse
by slower growth in the global
economy.
And yet the Saudis keep
pumping oil at virtually full
capacity. And they have
persuaded their Persian Gulf
OPEC allies — Kuwait, the
United Arab Emirates and
Qatar — to do the same,
despite mounting pressure
from other big OPEC members
to curtail production.
It is a risky strategy — one that
is already straining Saudi
finances and threatening the
kingdom’s ability to continue
providing generous social
programs, like subsidized
housing and cheap energy, that
the royal family has long used
to buy domestic tranquillity.
Oil provides more than 70
percent of Saudi government
revenue. And though the
Saudis still have about $630
billion in financial reserves,
they are spending them at a
rate of $5 billion to $6 billion a
month, according to Rachel
Ziemba, an analyst at Roubini
Global Economics in New York.
But so far, Saudi Arabia is
essentially betting that it can
win an oil-price war of attrition
— not only against its OPEC
rivals like Iran, Iraq and
Venezuela, but also against
non-OPEC rivals like Russia
and the many shale-oil
producers in the United States
that have contributed to the
global glut.

mobile.nytimes.com/2016/01/28/business/energy-environment/saudi-arabia-keeps-pumping-oil-despite-financial-and-political-risks.html