From: mccall@mksol.dseg.ti.com (fred j mccall 575-3539)
Subject: Re: The end of the Reagan Era
Organization: Texas Instruments Inc
Distribution: usa
Date: Fri, 20 Nov 1992 15:03:05 GMT

In <Bxz6yB.78K@NeoSoft.com> hari@NeoSoft.com (Doug Andersen) writes:

>In article <1992Nov19.141939.18483@mksol.dseg.ti.com>, mccall@mksol.dseg.ti.com (fred j mccall 575-3539) writes:
>> I presume that you mean that oil has a relatively high price
>> elasticity of demand when you say it is "economically elastic" (or
> 
>Yes, I'm talking about elasticity of demand. 
> 
>> Of course they aren't keeping the price of oil low out of the kindness
>> of their hearst!  Who said they were?  They keep (and kept) it low out
>> of ENLIGHTENED SELF INTEREST, because they needed us as friends.
> 
>And I'm arguing that they keep the price of oil low because they think
>that's where they can maximize their profits.

Well, this is probably impossible to know without being able to sit in
on the meetings of the royal family.  However, if you look at the
trends since the early '70s, I think what you will find is that the
Saudi's changed their behaviour when Islamic Fundamentalism started
gaining real power in the region.  This says to me that sheer monetary
profit is not necessarily the driving force behind their decisions to
favour the United States.

> 
>> Secondly, Saudi Arabia hardly needs to "control" OPEC to drive down
>> the price of oil on the spot markets or in delivery contracts.  This
>> is why cartels don't work as well as they could, after all -- nobody
>> CONTROLS them as an individual; everyone is out for their own good,
>> and one or two members 'breaking' can keep the cartel from being too
>> effective. 
> 
>That's right.  But Saudi Arabia obviously favors OPEC.  If SA wanted
>higher production than any of the other members of OPEC, it would
>obviously make sense for them to get out of OPEC since its unlikely that
>other countries would sell cheaper.

Of COURSE they favour OPEC.  I'm not sure why this is germane.
Actually, it makes more sense for them to stay IN OPEC, no matter what
their goals, because they're the biggest dog in the pack and can have
things more their own way than if they just walked out. 

> 
>> That turns out not to be the case.  If you study the records of the
>> OPEC meetings, you will find that Saudi Arabia is invariably the
>> member pushing for higher production.  In point of fact, it is well
>> known (it was even in the newspapers) that several years ago when
>> there was another attempt to squeeze the oil supply, that Saudi Arabia
>> was selling us large quantities of oil at below the cartel price.
> 
>Yes, I'm aware of that.  But there is a very good economic advantage to
>selling below the set price.  You don't need to bring factors like "good
>will" into the equation.  

You don't HAVE to, but then I don't think anyone ever said anything
about nations acting out of GOOD WILL -- it is all, of course,
enlightened self-interest.  That's why they give us those kinds of
price breaks, and that's why we're willing to help them defend
themselves.  Mutual advantage.

-- 
"Insisting on perfect safety is for people who don't have the balls to live
 in the real world."   -- Mary Shafer, NASA Ames Dryden
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Fred.McCall@dseg.ti.com - I don't speak for others and they don't speak for me.
Newsgroups: alt.politics.elections,alt.politics.marrou