“If you are the world’s leading energy economy, you produce energy, that’s what you do.” 

“A government can stay irrational longer than it can stay solvent.” 

“Even in the short term, you’re dead, if you commit suicide.” 

The first quote modifies a GEICO commercial describing a free-range chicken (If you’re a free range chicken, you roam free, that’s what you do), the second, the famous John Maynard Keynes quote about markets (The market can stay irrational longer than you can stay solvent), the third, another famous Keynes quote (In the long run, we’re all dead). 

Together, the three quotes provide a framework for analyzing Saudi options heading into the December 4 OPEC meeting in Vienna and its choices vis-à-vis the OPEC outsiders (all members but Saudi Arabia and its Gulf Arab allies, Kuwait, UAE, Qatar) – reconciliation, separation, or divorce. 

If You’re a Free Range Oil Producer… 

Despite low oil prices, Saudi Arabia is maintaining its investment in its oil industry. Saudi Aramco Chairman Khalid Al-Falih indicated in March that Saudi Aramco would not cut investment. James Crandell, a Cowen & Co. oil analyst cited in this article, who has tracked oil companies’ budgets for many years, estimates that Aramco and its Kuwaiti and UAE counterparts will increase their investment in oil exploration and production in 2015 by 4.5 percent to $38.1 billion. (If proportional to output, the Saudi share would be $24.5 billion). 

On it’s website, the Saudi Arabian General Investment Authority (SAGIA) identifies Saudi Arabia as the world’s premier energy economy, describes the outlook for the Saudi energy sector as never having been brighter or more secure and poised for unprecedented growth, diversification, and profitability, and asserts that the high oil revenue environment has spurred a boom in both oil and non-oil development projects. 

SAGIA is not making idle claims. It lists energy-related projects totaling $318 billion (no timeframe specified), which is, in SAGIA’s words, “large-scale capital spending [is] applied to building new capacity and expansion of existing facilities.” Of this, the Saudi government will finance $239 billion, while private investors will finance $79 billion, as well as investments in refining (which it does not specify).