This is a guest piece by James Rowe, an Assistant Professor of Environmental Studies at the University of Victoria in British Columbia and a member of the Corporate Mapping Project, a research alliance investigating the power of the fossil fuel industry in Western Canada. This piece originally appeared on openDemocracy.
The world’s largest producers of oil, Saudi Arabia and Russia, agreed to a production freeze in February 2016. This deal holds production at the near-record highs that were reached in January in an effort to stop the plunge in world oil prices. But even if other key producers like Iran and Iraq agree, it won’t address the supply glut that has been driving prices into the ground.
Saudi Arabia could be doing more to orchestrate a production cut, and the Saudis would certainly benefit from a price bounce—the Kingdom ran a budget deficit last year of nearly US$98 billion. So why is the House of Saud content to keep the world swimming in cheap oil?
The motivation for Saudi Arabia’s passive response to the price crunch is the source of much speculation, but the consensus is that the Saudis are working to protect market share—primarily by driving high cost ‘unconventional’ production like US shale oil out of the market. There is a larger force, however, that has not received enough attention in efforts to divine Saudi intentions: the ‘carbon bubble.’