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Crude Economics
Are the Saudis Really Fine With $20 Oil?
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  • motoguzzi

    At $20 per barrel are the Saudis making enough to keep their population docile?

    • FriendlyGoat

      Good question, and the answer—–after decades of something higher—–is “nope”.

      • Government Drone

        The article above says a $93/bbl price is needed for Saudi to stay “in the black”. I don’t think this is actually the cost of pumping the oil, but more the assumption made in the Saudi government budget, since oil profits are pretty much the only revenue source for that state.

        In theory, I suppose, if the Saudi people are willing to go back to living in tents out in the desert, they can live with $20 oil. But after 40-50 years of rolling in the cash, I have about as much confidence as FriendlyGoat has on this.

        The Saudis are just playing chicken with Iran & possibly Russia, figuring that their own banked profits will tide them through longer than whatever the Russian & Iranians have managed to save.

        • Curious Mayhem

          The Saudis, unlike most others, have both a large sovereign wealth fund and large foreign currency reserves. Russia’s are limited (about a year), and Iran and Venezuela have less. The Saudis will have to adjust, but have time. The others are headed for fiscal crisis — Venezuela is already there.

          Oil will probably stabilize in the 50s or low 60s, but not before it takes a final leg down into the 30s. Russia and Iran have rampaged from basically weak positions, partly b/c of Western incompetence and cowardice. But the collapse of oil will put a serious damper on all their plans.

  • Jacksonian_Libertarian

    The Saudis aren’t talking about the actual production costs of their aging and increasingly expensive oil fields. It’s lucky for the Saudis that the price of oil isn’t going to go down to $20 per barrel, because at that price even they would be producing at a loss.

  • R Spitzer

    ” Iran has a breakeven price north of $140 per barrel”

    Where did you get that information? It has not gotten above $130, and that is for Fiscal break even not pumping of the oil which is actually much lower.

    The Saudi’s (OPEC) are attacking Iran and Russia directly without disguise more effectively than the Americans are with their “pinpoint” air strikes in Syria and the laughable Nuclear talks. Saudi’s are making it clear they do not like Iranian and Russian policy with regards to either Syria or Iran’s nuclear ambitions. At the same time this policy is greatly assisting China which you will see in 2015 thank OPEC with more political support than previously seen. This is cheap diplomacy for the Saudi’s…. their alternative is Iran having more influence and a Nuclear Weapon which would be an end to their House.

    • Ellen

      Thank you R Spitzer for your correct analysis. And yes, the Saudis are trying to break the back of the Iranian regime without firing a shot. Within one year, Iran will headed for insolvency. The big question is will Obama bail them out by removing sanctions, and will the Iranian working class finally revolt against the thieves who run their government?

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