[D_Alex]

No... the Saudi oil production costs are circa US$10/bbl, and their marginal production costs (ie costs to produce one more barrel) are circa US$3.00.

They are not selling at a loss, but they are not making enough to run their country (that would take prices of ca US$80/bbl at the current rate).

[w0utert]

>> They are not selling at a loss, but they are not making enough to run their country

So without further measures to run the country differently, that effectively means they are losing money and not 'building wealth', right?

[charwalker]

Oil is still profitable, just not enough to run the country.

Imagine it's a bunch of small restaurants. The Saudi place is owned by a large family and is the biggest, leanest place running the highest profit but this Russian crew is edging in with a place across the street. Both sets of owners have deep pockets and can keep their place running for a while. Then the US is the fancy food cart in the parking lot down the road that costs more per plate and has less capacity but is right next to the office buildings so gets the most attention at lunch.

The Saudis are still covering all costs and making money but the owners have other big expenses that are draining their wallets. The drain is faster than what the restaurant can earn but they would be worse off if it shut down for a few months.

The Russians have muscled in and though not as lean are keeping up and still covering costs (though it's a lot harder to see the cash flow, it's sketchy).

Then the food cart is running on really low margins and has no backing, it's an independent place, but it is running profitable thanks to the lunch rush. If it had to shut down it wouldn't be a huge loss each month in fixed costs like rent as the trailer can be stored.

The Saudis and Russians want the food cart to go out of business asap so the lunch customers have to come to them and bump their profits so they have to stay open and but up big lunch deals, even if a virus is going around that slows down the whole industry. Hopefully they can weather the drop in margins until the food cart is no longer making money and gets put in storage (where it will take a while to hire staff and bring back up to speed if it ever makes it back out).

Then, it's an isolated price war between the Saudi and Russian owned places until they recognize a duopoly and mutually leave prices high while still pulling in the lunch crowd as they are the only options or tying to undermine the other but at least the food cart is gone and the office workers are all reliant on them for lunch.

[entropyneur]

Presumably part or running their country is investing into some projects expected to generate returns in the long run, i.e. building wealth.