I hate to cite Apple for examples, but they do a pretty good job of running a business and so here we go. Imagine you’re Apple, you’re making boatloads of money on iPods. Your cash situation is great. As a company you sit on so much cash you can buy whatever you want. Smartly, you decide to hold some of that cash for emergencies and use the rest to reinvest in the company. The iPhone is born, and you get even more cash.
Now imagine you’re Saudi Arabia. Your cash cow is not iPods, but oil. You love for Americans and Chinese to drive gas guzzlers. Over the years you’ve milked that teat for almost all its worth. You have lots of cash, are you going to use it to reinvest in the country so that you may thrive further down into the future? Nope. You’re going to subsidize oil for your people, build castles made of gold, and form cartels to protect your dying industry.
Which brings me to today. Oil consumption is down due to a global recession and increasing awareness of greenhouse emissions and fuel efficiency. Saudi Arabia knows that oil is their cash cow, and every barrel we don’t buy is lost revenue for them.
Enter what can only be called “stragegery”. The Saudis are trying to bring oil producers together (presumably OPEC) to confront wealthy nations regarding their reduction in oil consumption. Here’s how it works, if the United States reduces their oil consumption by one barrel, we must compensate the oil producers for that one barrel. It’s like going to the grocery store, and buying a half-gallon of milk instead of your full gallon. If you don’t buy the full gallon, you should still compensate the store for reduced purchase. This is their actual suggestion!
Stupid doesn’t begin to describe this idea, but I can’t help but congratulate them for having the cojones to propose such a radical idea. Even better, this isn’t the first time they’ve done it. No, going all the way back to the early 90s with the first green movements the Saudis quickly recognized what it meant and made these proposals then.
Thankfully, as dumb as the United States and other wealthy countries sometimes are, they aren’t dumb enough to fall for this. From an economics perspective it doesn’t even make sense. If we don’t buy the oil, someone else will. So hell no you fools.
I don’t give a Weaky to Saudi Arabia for their proposals to protect their cash cow. Everyone company, government, and individual will always do similar things to protect their primary revenue stream. Saudi Arabia gets a Weaky for not thinking ahead and developing industry that doesn’t rely on oil. In 50 years, they’ll be a nothing state with a bunch of holes in the ground.
Photo: photocapy
 By The Weakonomist |
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Said,
Said,
“In 50 years, they’ll be a nothing state…” Just like they were 100 years ago
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