Simulating Saudi Arabia's oil export strategy

Abstract

A system dynamics model of Saudi Arabia's oil export strategy has been constructed. Besides providing estimates of future oil exports, this work demonstrates the application of stochas tic simulation models with feedback to the examination of de cisions involving multiple objectives. Such models can be used in real-world strategic planning where decisions affect the achievement of many goals simultaneously, and where tradeoffs must be made between different objectives. Since strategic planning occurs in an environment of uncertain events, it is necessary to explore the limits of the system behavior so best and worst case scenarios can be defined.

Our model, called the Saudi Oil Decision Model, uses inter views with informed people to estimate probable values of ex ternal factors and to validate the system structure. The model considers seven Saudi national objectives, four of which are advanced by increasing exports and three by decreasing ex ports. The feedback structure balances increases and de creases in exports according to criteria that measure the achievement of all seven objectives.

The model was simulated in a Monte Carlo mode, and the results were examined to determine which combinations of ex ternal events produced the largest changes in oil exports. Analysis shows that large increases in Saudi oil exports are unlikely, given their national objectives as evidenced in past behavior. The reason for this derives from the dynamics of compromise between conflicting objectives. The Saudi Oil Decision Model is the first multi-objective model to be ap plied to the political-economic problem of oil exports from Saudi Arabia.