Today the oil price climbs above 64 dollars a barrel after Saudi Arabia’s domestic political changes. Saudi Arabia recently arrested dozens of princes and business tycoons under its anti-corruption crackdown, it has raised the financial market’s concerns about the political stability of Saudi Arabia, the world’s largest crude oil exporter. The future oil export policy and its political continuity closely rely on its domestic political stability.
Earlier the king of Saudi Arabia visited Russia and discussed the policy of crude oil exporting. It may imply that the two major crude oil exporters are likely to collude in terms of the future energy policy, especially when many countries have been putting lots of efforts on developing new alternative green energy. The development of new energy will lower the oil price in the long run; to slow down the speed of replacing crude oil by other alternative energy, the oil price has to be low in order to make the idea of replacing crude oil less attractive; however, at the same time, when the oil price is low, the profits these crude oil exporters can get are certainly low as well, though the sales may increase due to the lower price.
Therefore, there is a paradox here that exporters want to increase the oil price so they can get more profits but meanwhile they also want to lower the oil price in order to make oil more competitive when comparing with other alternative energy.
While the price of using other alternative energy is lower, the oil price will drop again significant. Once the oil price is low, there is not much room for it to increase any more unless there is an event that makes the oil production drop dramatically.
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