How did Saudi Arabia use its large oil reserves to influence OPEC production and prices?

Saudi Arabia has historically exerted significant influence over OPEC policy and global oil prices due to its status as one of the world’s largest oil producers, holding approximately one-fifth of known global reserves.1

During the 1970s, Saudi Arabia utilized its massive proven reserves and productive capacity to act as the organization's "residual supplier." By voluntarily cutting back its own production when global demand slackened, the kingdom effectively reduced downward pressure on prices, helping to enforce OPEC's price increases. This role was sustainable for Saudi Arabia in part because its limited population allowed it to maintain a high per capita income even when producing well below its maximum capacity.2

However, this influence fluctuated as market conditions changed. By the mid-1980s, increased non-OPEC production and conservation efforts led to a softened oil market. As Saudi Arabia’s own production fell and its development costs rose, it became less willing to unilaterally bear the burden of production cuts, prompting OPEC to attempt a transition toward a more formal system of member production quotas.2