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For the US government, it doesn't matter particularly if OPEC keeps the level of supply up or not; low oil prices may cause the local oil production to stall bu

For the US government, it doesn't matter particularly if OPEC keeps the level of supply up or not; low oil prices may cause the local oil production to stall but they also dramatically help all other branches of the US economy. If supply goes down and prices up, the exports will just resume again. Saudi Arabia and other OPEC members however need high prices, they are not just a mere luxury to them. They may have $10 lifting costs but they have overextended their state budget by relying on oil profits to the point where they need a $80+ price to just maintain the status quo. They have no meaningful other economy.

zubiaur 11y ago
Absolutely. What are their alternatives though? If they limit supply to keep artificially high prices they will still get a diminished accumulated income due to market share erosion. They will also encourage investment in oil producing capacity outside OPEC, risking further market share erosion. If they let supply and demand set the price it will eventually drive high OPEX producers out of business, somewhat mitigating their losses in market share and with the possibility for them to recover some of their lost income. It's a matter of high OPEX products going out of business before they run out of cash reserves