Publications: Notes at the Margin

Killing the Oil Market, Killing Oil (December 20, 2021)

 

On December 13, Saudi Arabia’s oil minister, Prince Abdulaziz bin Salman, warned traders not to short oil prices: “‘Thanksgiving was a Thanksgiving day for the speculators,’ the minister said. ‘But let them dare to do another Thanksgiving. They will be ouching like hell.’”[1] Bin Salman noted that, if the traders did short oil, OPEC+ could react quickly, presumably with a production cut to offset any price fall.

 

The prince’s admonishment was a mistake. By telling speculators to take their money elsewhere, he essentially says he wants to kill the oil market. Traders will likely heed his advice. Hence, a market already hungry for capital (see the December 20 Notes at the Margin) will be starved further. Speculators considering long positions—presumably an action the prince and other OPEC+ members would applaud—will be scared away from oil. The market will shrink.

 

Nothing could please environmentalists more than a diminishing oil market. The resultant price increases and lack of liquidity will speed the phase-out of oil—and natural gas—in large consuming nations.

 

 

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