Some people remain intent on believing that falling oil prices are the result of a conspiracy to keep Republicans in power. No sooner had I addressed the theory that Goldman Sachs had somehow initiated the huge price swings currently underway than a new theory pops up to replace it.
Today’s Washington Post carries an article titled “Conspiracy Theories Abound as Oil Prices Fluctuate” written by Steven Mufson. This article advances a number of conspiracy theories under the journalistic cover of reporting “this is what some people are saying,” as opposed to presenting any evidence to support them. In addition to repeating the Goldman Sachs hypothesis (without mentioning any of the pertinent facts detailed here at Econbrowser or at Gumby Fresh), the Washington Post article devotes most of its attention to the possible role of Saudi Arabia:
According to this theory, the Saudi government is doing Bush a favor by trying to bring down prices before the election. The evidence? Some say the Saudi government has a long-standing relationship with the Bush family. They also cite the 2004 book by author and Washington Post assistant managing editor Bob Woodward, “Plan of Attack,” which said that then-Saudi ambassador to the United States, Prince Bandar bin Sultan, promised to keep oil production high enough to moderate fuel prices and bolster the U.S. economy during the presidential election year.
Now, with crude oil prices tumbling and OPEC members calling for production cuts, Saudi officials — at least publicly — are saying they will wait until the next meeting of OPEC oil ministers, which happens to be scheduled for December. “OPEC will be meeting I think within a month or two to review these factors, and we will discuss these things with countries like Venezuela and Nigeria,” the Saudi ambassador to the United States, Prince Turki al-Faisal, told reporters after giving a speech in Washington on Wednesday.
But oil traders are worried that Saudi Arabia won’t wait. Yesterday, oil prices closed slightly higher on reports that OPEC, including Saudi Arabia, has decided to cut output. A well-placed trader in Europe said the kingdom has quietly trimmed its output to 9.15 million barrels a day, from 9.3 million barrels a day, and that it has been talking about shaving a bit more if other OPEC members also cut back to stop the rapid slide in oil prices.
So let me see if I’ve got this straight– the evidence is that (1) Bob Woodward says that somebody told him that the Saudis made a promise in 2004 and (2) the Saudis could have reduced production by even more than they already have, if they really wanted to keep prices from falling. As for (1), the Saudis have made plenty of promises — publicly, for all the world to see– that came to nothing. And as for (2), what sort of economic theory is this? That the Saudis have been decreasing production over the last year is indisputable. If an even bigger production cut than the Saudis have already made would have been necessary in order to keep prices from falling, doesn’t that prove rather conclusively that the cause of the price drop must be something other than what the Saudis have done?
Sometimes I feel like Econbrowser is playing Whac-a-Mole.