Understanding the unlikely Saudi push for lower oil prices

Cartels have one — and only one — raison d'être: Push prices higher.

- JAVIER BLAS

Cartels have one — and only one — raison d'être: Push prices higher. Organization of the Petroleum Exporting Countries (OPEC), the most famous of all of them, is a textbook example. So why is Saudi Arabia, which leads the group, driving prices down?

Ostensibly, the kingdom is trying to reestablish discipline among rogue producers: Kazakhstan, Iraq and the United Arab Emirates are cheating on their output targets. To force them to relent, Riyadh is voting at OPEC+ meetings for higher production for the whole group, hoping that the ensuing price decline forces the troublemakers into line.

The explanation makes a lot of sense. First, because the cheating is real, it's getting worse and the unruly countries have ignored warnings. Second, because Saudi Arabia has done it before, launching price wars against OPEC cheaters in 1985-86, 1998 and 2020. Yet, I'm unconvinced that's all there's to it.