The Prize: The Epic Quest for Oil, Money, and Power

by Daniel Yergin

Rising oil prices had become the object of constant attention by presidents and prime ministers, as well as the fodder of front pages for months. They were also a subject of intense dismay for the leaders of Saudi Arabia. Once again, they were alarmed both by their own loss of control over the market and by the fact that control seemed to have passed into the hands of such militant and uncompromising rivals as Libya and Iran. They thought that the wildly rising prices threatened the world economy with recession, depression, or even ruin, and thus threatened their own well-being. The days in which Saudi Arabia’s economic future was determined by the number of pilgrims who came to Mecca were long since past; now it was the “rates” that mattered to Riyadh—world interest rates, exchange rates, inflation rates, growth rates. The Saudis also feared that their own position would be damaged in another way: that the price increases would destroy consumers’ confidence in oil and, thus, stimulate long-lasting competition to OPEC oil, as well as large-scale development of alternative fuels. That would be particularly threatening to a country with huge oil reserves, the life of which would extend far into the twenty-first century. The Saudis responded to the predicament with jawboning: Yamani became more of a hawk on the need for conservation to blunt price increases than almost any Western leader. The Saudis tried to hold down their own official prices, even if that meant leaving mone...