Saudi Arabia and the Oil Market

30 Pages Posted: 15 Dec 2013

See all articles by Anton Nakov

Anton Nakov

European Central Bank (ECB); CEPR

Galo Nuño

Banco de España

Date Written: December 2013


In this study, we document two features that have made Saudi Arabia different from other oil producers. First, it has typically maintained ample spare capacity. Second, its production has been quite volatile even though it has witnessed few domestic shocks. These features can be rationalised in a general equilibrium model in which the oil market is modelled as a dominant producer with a competitive fringe. We show that the net welfare effect of oil tariffs on consumers is null. The reason is that Saudi Arabia's monopolistic rents fall entirely on fringe producers.

Suggested Citation

Nakov, Anton A. and Nuno, Galo, Saudi Arabia and the Oil Market (December 2013). The Economic Journal, Vol. 123, Issue 573, pp. 1333-1362, 2013. Available at SSRN: or

Anton A. Nakov (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

CEPR ( email )

United Kingdom

Galo Nuno

Banco de España ( email )

Alcala 50
Madrid 28014

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