Faced with the massive increase in output from US shale, Saudi Arabia faced a stark choice between cutting production in order to maintain prices, and turning the taps on in order to maintain its share of the global market for oil. It chose the latter; with the result that prices have plummeted and the US shale drillers are on the verge of bankruptcy.
But Saudi Arabia hasn’t escaped unscathed from the market share battle. According to Anjli Raval in the Financial Times, Saudi Arabia has lost out in 9 out of the top 15 oil markets, including China, South Africa and the USA. According to Raval:
“Oil producers including Russia and Iraq are putting pressure on Saudi Arabia in markets it regards as strategically important trading partners.”
It is this additional competition that has driven the 17 April meeting in Doha where Saudi Arabia is hoping to get an agreement with its competitors to freeze output.
Less obviously – but much more alarmingly – Saudi Aramco, the massive state oil corporation – is seeking to lock in its market share by taking over oil refineries in key markets:
“The company — which this month announced plans to take full ownership of a Texas refinery, the largest in North America — is looking for more facilities in China, where it already has a presence, as well as India, Indonesia, Malaysia and Vietnam.”
The ultimate aim is to create a vertical infrastructure that deprives an importing country of the means to import cheaper oil from a competitor in future. This is a particular concern in the UK, where an unthinking administration that puts ideology far ahead of common sense has proved far too keen to sell critical infrastructure to foreign governments.