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: Thu, 19 Nov 1992 14:19:39 GMT

In <Bxttz4.Ipy@NeoSoft.com> hari@NeoSoft.com (Doug Andersen) writes:

>In article <1992Nov15.143913.15262@mksol.dseg.ti.com>, mccall@mksol.dseg.ti.com (fred j mccall 575-3539) writes:
>> Perhaps, but if they had a huge, overpowering military, you don't
>> think they would use it?  Oh, maybe nothing quite so crass as a direct
>> invasion, but use it nonetheless?
> 
>I think the Saudi's are big proponents of stability.  Unlike most of their
>neighbors (Iraq, Iran, Syria, Lebanon) they've been fairly peaceful.

One needn't start a war in order to 'use' the possession of large
amounts of military power.  See 'Finlandization'.

> 
>> Well, not necessarily, because there is more to Saudi Arabias wants
>> and needs than monetary profits from oil.
> 
>Oil, like most products, is economically elastic.  First of all, I don't 
>believe that SA is keeping oil prices low out of the kindness of their
>hearts.  Second, while SA is a strong influence, it does not control OPEC.

I presume that you mean that oil has a relatively high price
elasticity of demand when you say it is "economically elastic" (or
perhaps you are referring to price elasticity of supply -- it's not
quite clear from the context).  In either case, your point here is
certainly unclear and the statement that "most products [are]
economically elastic" doesn't seem to follow logically or be as
tautologically true as you seem to imply it is.  

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.
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. 

> 
>> Well, nothing is forever, but if you string together a lot of 'short
>> term' things you get a somewhat longer term, after all.  It would be
>> naive in the extreme to expect ANYTHING to last forever; hell, how
>> much have the French gotten back for their assistance in our
>> Revolution?  But then, they didn't interfere for 'rewards'; they
>> interfered for their own purpospues.  Just like we do.
> 
>Fred, there simply isn't any evidence that SA is holding down oil prices 
>to keep the U.S. happy.  

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.

>If they were so interested in keeping us happy
>they'd sign a peace accord with Israel or stop funding terrorist groups.

Why?  You think the average American cares more about Saudi Arabia
(who has never fought Israel, by the way) signing a peace accord with
Israel than they do about the price of gasoline and heating oil?  As
for 'funding terrorist groups', it's silly to say that if they really
wanted to keep us happy they would do something that is political
suicide for themselves, wouldn't you say?

>I think SA understands that oil shocks just push countries into increasing
>their oil efficiency and looking toward alternative energy sources.

No doubt, but how does that invalidate anything else?  I don't see
that as their sole reason for their actions in what is a very complex
situation. 

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