Inany area of business, an insidious arrogance about a company’s approach toward maintaining market supremacy. That mentality usually trickles down to the marketing of whatever product is being sold.
When it comes to oil, Saudi Arabia and its state-run oil company, Saudi Aramco, have been the world’s leader in supplying customers across the globe. Beginning in the 1970’s, the Kingdom discovered just how valuable their commodity was and instituted higher prices and more rigid rules when purchasing oil.
In 2016, the oil market continues to flounder with prices that have dropped more than 50 percent. Despite this drop, Saudi Arabia chose to continue to increase production until even they were eventually affected. In addition, they remained virtually inflexible when it came to selling oil any other way than fixed contracts.
Previously, this has allowed customers to have a set price in place, though any additional oil they need would be more costly. Due to the reluctance by the Saudis to offer spot cargoes or more flexible prices, those companies have found other nations that are willing to accommodate them in this particular need.
Saudi Arabia has actually had a small increase of less than one percent in oil shipments to China. The problem with that percentage is that the Chinese continue to be ravenous when it comes to acquiring any sources of oil, having bumped up their percentage of imports by almost 14 percent this year. Much the same story can be told in another highly-populated market like India.
Filling the gap because of better pricing structures are competing countries like Iraq and Russia, which means that Saudi Arabia continues to see its overall market share get chipped away. Trying something new can be difficult, but it appears time for the Saudis to understand the new reality.