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Politics : Foreign Affairs Discussion Group

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To: Nadine Carroll who wrote (109474)	8/2/2003 1:45:37 PM
From: quehubo	Read Replies (2) of 281500

<<I thought that Saudi Arabia's usual lever on the market was to use their reserves to flood the market and lower prices sharply? This keeps the other oil producers in line>> Saudia Arabia has this power, but over time the need to employ this threat and their ability to do so has been greatly diminished. They would have to be mortally terrified of other producers to flood the market with oil if they could now because their net revenues with higher production would be much lower. Their is no linear response in supply demand. Also because most producers are near maximum production, Saudia Arabia mostly acts to balance the market to maintain high prices. My point is that Bush cannot screw the Saudi's to much now because they have the power to increase their revenues tremendously and bring very significant pain to the World and lay the blame on Bush. I believe that today they are purposely maintaining lower production to keep pressure on Bush while raking in mega profits for OPEC under the guise that Iraqi production should be online soon and thus lower prices.

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