In this article, it is reported that Saudi Arabia wants to do what it can to mitigate the price of oil. Saudi Arabia also says that it would if it had control of the market, but that it sells its crude oil based on international prices. The autor of the article finds this statement by the Saudis to be a fallacy. In the article he talks about how OPEC, of which Saudi Arabia is the largest member, limits the supply of crude oil to the market to make prices high.
Saudi Arabia and OPEC, are parts of an oligopoly, but since they control almost all of the supply of crude oil they are able to act as a sort of monopoly. Doing this causes them to act like a monopoly, which hurts the economy in general, and creates dead-weight loss. Since they are a monopoly they do not want to produce any more oil then they would in a competitive market, and as we learned in class, they make a higher profit if they sell less. They do not have as high of costs and can also charge a higher price. This allows them to make the huge profits that they do.
The fact that Saudi Arabia and OPEC are basically a monopoly, causes policy implications for the United States. The United States would not have such a large interest in the Middle East, if it were not for it's oil.
Source:http://www.huffingtonpost.com/raymond-j-learsy/the-price-of-oil-saudi-hy_b_1390403.html?ref=business
This is a good analysis of the article and does a good job in showing how Saudi Arabia plays a major role in the oil refining industry. One thing you should touch on is the fact that oil is a common resourse that is non-renewable. With this in mind, it is in the best interest of this oligopoly to minimize the amount of oil they harvest in order to preserve the market into the future.
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