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I suspect that Saudi etc are as startled by the high prices as we are!

However I bet they like the increased revenue!

They probably now realise that they can ship lower volumes and STILL make a fortune.

I doubt that they will ever be persuaded to increase volumes to bring prices down.

Why should they?

An interesting thought, but I don't think so long-term. The problem, I'd imagine, is that SA doesn't actually make very much and they'll have to import a lot of the stuff that they want to spend all those $$$$s on. Trouble is, if all the manufacturing countries are reeling under a spiralling oil price their businesses will fold leaving no stuff for SA to buy.

But then what do I know about economics...

You need to read WestTexas's export land model over at the oil drum. This is what he calls phase one - exports are falling but prices are exploding - the less they pump, the more money they make. This creates so much profit that domestic demand rises rapidly, reducing exports further. Positive feedback.

Later comes phase two - where the importers can no longer afford to keep buying at any price. The price rises tail off, and the exporter's profits start to fall. This dampens down domestic demand, and we start getting negative feedback. The price presumably settles down a bit. Exports keep falling.

phase three is when exporter's production falls to the point that it equals domestic demand. What happens then depends on the economy of the exporter. A wealthy first world nation (for whom oil exports were a small part of GDP anyway like the UK) will simply become an importer, and further drive up the price of oil in exportland. If the country is a banana republic like Saudi Arabia, where oil IS the gdp, the country goes broke, the peasants revolt, and oil production falls to zero as the flames rise...

(OK the last bit is my poetic licence)

This creates so much profit that domestic demand rises rapidly, reducing exports further. Positive feedback.

Hadn't thought of that. Interesting.

Vortex wrote:

This creates so much profit that domestic demand rises rapidly, reducing exports further. Positive feedback.

Hadn't thought of that. Interesting.

And the gov't can afford to keep subsiding domestic consumption too.

Yes Ralph, but that's looking at the UK - Saudi world. Things get more complex when you add in the whole panoply of nations. Where, for instance, does Brazil with its large(ish) oil resources, manufacturing industry and population, fit into the scheme?

biffvernon wrote:Yes Ralph, but that's looking at the UK - Saudi world. Things get more complex when you add in the whole panoply of nations. Where, for instance, does Brazil with its large(ish) oil resources, manufacturing industry and population, fit into the scheme?

Brazil is about oil neutral. It has increased production, and grows enough biofuel, to meet domestic demand at present. It has made significant deepwater discoveries, and has the technology to exploit them in theory.

However...

in the short term it's production is likely to peak (unlike it's demand)...
deepwater wells peak quickly because they are managed for fast extraction, given very high running costs.

I think Brazil will continue to expand biofuel production until the local climate is irreversibly changed the DODGY TAX AVOIDERS rain forest burns to a crisp. At that point, it will no longer be able to feed it's massive population and will implode. They have maybe 20 years... better than many.

As you say, no two countries are exactly the same. I think the UK is going to go downhill very rapidly in the next 10 years. Collapse is by it's nature chaotic and unpredictable.