Discounted Saudi Crude Shaped Refiners’ Political Contributions, Paper Finds

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One would think that, as a global commodity, any particular grade of oil would fetch a similar price regardless of where it was sent, but for a 12-year stretch Saudi Arabia sold crude to U.S. refiners at a substantial discount. To judge from the political contributions they made, the refiners appreciated the gesture.

From 1991 to 2003, Saudi Arabia was the top supplier of foreign crude to U.S. refiners, a position it maintained as a way of supporting its political alliance with the United States. To keep the flow of Saudi crude to the U.S. high amid growing competitions from countries like Mexico, Saudi Aramco, Saudi Arabia’s national oil company, put a lower price on the crude it sold to the U.S. than to other countries. In 2001, U.S. refiners paid about $21 a barrel for Saudi crude, while Asian refiners paid over $27. All told, U.S. refiners got a discount worth $8.5 billion over the 12-year period, calculates Jennifer Peck, an economics Ph.D candidate at the Massachusetts Institute of Technology.

WSJ