ABSTRACT
The model regards the oil sector as a generator of income flows and ignores the mechanism of crude-oil production. Saudi Arabia is also the first country in petroleum reserves. From 1938, the first year of production, to 1976, more than twenty-eight billion barrels of crude oil have been produced, that is, twenty-six per cent of the 1975 proven reserves and sixteen per cent of the 1975 probable reserves. The production of crude oil is an activity that consumes reserves to generate income flows. Therefore, the level of crude oil reserves depends upon the production flows. The analysis of the price of crude oil is complex. It involves such elements as the world demand for crude oil, OPEC, the oil companies, the domestic development of the oil-producing countries, world inflation, the search for and cost of oil substitutes and other social, technical, economic and political factors.
