Saudi Arabian officials recently stated that the kingdom is comfortable with oil prices in the $70 – $9o per barrel range; which is where oil prices have been for quite a while. US consumption of gasoline has been declining for many months as a result of the high price of crude oil. Historically, the Saudis would rapidly increase production to prevent rapid price increases that would lead to significantly reduced demand in the US.
Why is Saudi policy different now? I believe it is because the Saudi government recognizes that China will pay practically any price per barrel, because maintaining China’s economic growth is critical to China’s domestic stability. Dramatic reductions in oil use in China would signal reductions in overall economic output. It is fairly well recognized that maintaining economic growth by any means necessary is the only method short of military repression that China’s government has for placating an increasingly restive populace.
The Saudis likely feel that risks of decreased demand in Western countries are offset by the massive cash flow they are receiving at today’s prices; which is driven by Chinese purchases.