Saudis change oil minister but keep failed market share policy

Bloomberg/Fuel Fix:
Saudi Arabian Oil Minister Ali al-Naimi, the architect of the 2014 switch in OPEC policy that’s since has roiled the energy market, companies and entire economies from Mexico to Nigeria, is leaving his post.

An 80-year-old who rose from modest Bedouin roots, al-Naimi headed the ministry for almost 21 years, steering the world’s largest crude exporter through wild price swings, regional wars, technological progress and the rise of climate change as a key policy concern.

“During my seven decades in the industry, I’ve seen oil at under $2 a barrel and $147, and much volatility in between,” al-Naimi told a gathering of the who’s who of the American oil industry in February in Houston. “ I’ve witnessed gluts and scarcity. I’ve seen multiple booms and busts.”

The departure of al-Naimi, who for years could move markets just uttering a few words, is the latest sign of how the country’s young Deputy Crown Prince Mohammed bin Salman is stamping his authority over oil policy. Khalid Al-Falih, chairman of Saudi Arabian Oil Co., the state-owned producer, will replace him as minister of energy, industry and mineral resources. Al-Falih is known to be close to the king and to Prince Mohammed.

“Khalid has been integral to the current oil policy of Saudi Arabia and has worked very closely with the deputy crown prince,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University in New York and a former White House oil official.

Saudi oil policy is unlikely to change with al-Falih. If anything, Prince Mohammed has insisted that Saudi Arabia will continue to defend its market share and won’t agree to any oil output freeze to curb the global glut without the participation of other major producers.

“We don’t care about oil prices,” Prince Mohammed told Bloomberg in an interview in April. “$30 or $70, they are all the same to us. We have our own programs that don’t need high oil prices.”
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This policy is turning OPEC into a suicide pact, with weaker members on the verge of collapse.  Meanwhile, their original target, US shale producers,  are becoming more efficient and able to compete on price.  The Saudis and OPEC have lost the ability to manipulate prices.

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