36._The_Good_Sweating_S08

36._The_Good_Sweating_S08 - 36. The Good Sweating: How Low...

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36. The Good Sweating: How Low Can it Go?
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2 Major Themes Oil is just another commodity Saudi Arabia emerges as dominant player Lower oil prices Benefits for consumers Disadvantages for oil producers Unique position of the USA Oil trades around $20 for next 15 years (companies assume less)
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3 Oil as a Commodity A realignment of oil trading in early 1980s Need to manage price risk Rise of energy commodity trading Only way OPEC could influence price was by controlling production OPEC’s transition during early 1980s From a free-for-all Saudi Arabia as the dominant producer
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4 Saudi Arabia’s Role Saudi Arabia as the residual supplier Rising non-OPEC production Falling oil demand Plunge in Saudi revenues $120 billion in 1981 to $26 billion in 1985 They decided to increase production Why? Two advantages They gain some revenue from volume increase They instill discipline among cartel members
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36._The_Good_Sweating_S08 - 36. The Good Sweating: How Low...

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