This project aims to uncover the true opportunity cost of oil for Saudi Arabia, disaggregating the impacts of compound decisions and separately evaluating the impacts of those decisions on depletion policy, production quotas and spare capacity.
Assessing the opportunity cost of saving oil depends on a baseline narrative. A cap on exports implies that a barrel deferred from domestic sale will not be exported but stored – probably as underdeveloped reserves. The value of that barrel is then the present value of the future net marginal revenue at the time it is sold. The value of saving oil, therefore, depends on international market conditions.