A crude move

The Saudi Arabians have cut oil production to boost prices and fatten their wallets. It’ll work. But higher inflation will be collateral damage.

“Turning off the taps” by DALL•E

Saudi Arabia is the largest country in the world without a river. But, what they lack in lagoons, they more than make up for in oil. The world’s second-largest oil reserve flows beneath their deserts, and it’s quick and cheap for them to suck a barrel out. That allowed the kingdom to take control of the oil market and get rich. But, to help balance their budget, they’ve cut production to push the price of the black stuff up. Oil prices should remain elevated, and that will slow headline inflation’s fall. Central bankers beware.

Over the next few months, oil prices should trade between $90 and $100 a barrel. Saudi Arabia and Russia have both cut production to boost prices. Saudi, in particular, has cut production to its lowest non-pandemic level since 2011. They’re now pumping 9m barrels daily, down from the 11m peak a year and a half ago.