Saudi Oil Minister Ali al-Naimi keeps telling us that the world's top petroleum exporter is not going to cut production to prop up global oil markets: "We are not going to cut - If they (non-OPEC) want to cut production, they are welcome."
“It is not in the interest of OPEC producers to cut their production, whatever the price is,” he recently told the weekly newsletter Middle East Economic Survey. “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”
As in the ultimate bluffing game, Liar's Dice, Ali al-Naimi is looking into the eyes of his opponents - from the deepwater drillers off the coast of South America and Western Africa to the unconventional (shale) U.S. producers - and making such claims with arrant confidence.
Though it's true that Saudi Arabia and other Gulf oil producers enjoy significant advantages in crude oil extraction - production costs of only $5 - $10 a barrel - contrary to accepted thinking - the monarchies in the Middle East cannot withstand long periods of persistently low crude prices.
With youthful unemployment rates ranging from 22% - 40% in the under 25-set, Saudi Arabia, Qatar, Kuwait and their oil neighbors maintain political order in their respective kingdoms only through "cradle-to-grave" social welfare programs.
In 2013, oil accounted for roughly 90 percent of Saudi Arabia's overall budget income and Kuwait at 92 percent, according to Reuters' calculations based on official data.
In 2013, oil accounted for roughly 90 percent of Saudi Arabia's overall budget income and Kuwait at 92 percent, according to Reuters' calculations based on official data.
As suggested in this Jeffries fiscal spending chart, such largesse is unsustainable. Ergo, as in the dice game, it's time for U.S. producers to challenge the putative supremacy of the Saudis by calling their bluff: "liar!"
