[OPE-L:6220] Re: economics of oil

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Mon Nov 26 2001 - 13:48:05 EST

Dear Cyrus,
Thanks much for the wealth of knowledge that you have sent me. I 
shall be reading and thinking through these important analyses this 
week.  In the NYT Neela Banerjee has been reporting that the Sa'udis 
are selling oil at some kind of discount to downstream American 
companies as a way of ensuring US support for the House of Sa'ud. The 
more American oil companies depend on 'cheap' Sa'udi oil, the more 
the House of Sa'ud can count on US political support.  She has 
reported that the oil could be sold at a higher price to Asian 
refineries.  This would seem to suggest that some of the differential 
Arab rent is appropriated directly by downstream American firms.  For 
example, in using netback deals (yergin, p. 748), wouldn't the 
Sa'udis be agreeing to limit severely their take of the differential 
I want to get this point straight because it seems that not only in 
Saudi Arabia but also in the NYT there remains the myth of there 
being cheap Sa'udi oil that has been given up to US firms for 
essentially *political* reasons. But of course you have challenged 
the whole idea of "cheap" and "expensive" oil.
All the best, Rakesh

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