The Price of Crude Oil: Crude Oil Price Paradigms, the Market Structure of the Petroleum Industry, and the Kingdom of Saudi Arabia

Author: S. Akif Irfan

This paper explores the unique features of the crude oil market which have resulted in a certain kind of market structure that in turn has shaped and determined the behavior of various participants in the industry. The paper finds that the identification and reporting of the price of oil—which is at the conjunction of various countervailing producer, midstream handler, refiner, and consumer interests—has had major paradigm shifts since the start of the crude oil industry. These shifts have redetermined the direction and development of international norms and local realities. The paper focuses its analysis on how the internal logic of the crude market and the major shifts in pricing paradigms have served to produce a certain kind of lived reality in the Kingdom of Saudi Arabia and has also determined the relationship Saudi Arabia has with the United States and the rest of the world more generally. The paper also seeks to use this market structure driven analysis to complicate and critique longstanding frameworks that have been used to understand the impact of crude oil upon the Kingdom of Saudi Arabia and other oil producing states.