Why do nations sell resources -E.G. oil- to each other, only to buy it from other countries? Why not use what oil you need for your country, and sell the excess produced?


Like, the U.S. is an extremely affluent nation. Why are we working with the Saudi government only to get cheaper oil when we already produce a very large amount of it?

In: Economics

Sell for more, buy for less –> Profit

Also, afaik the US doesn’t sell Oil anymore. They’re hoarding it for themselves

It still has a cost in the country and is usually even more than if it was to buy from some country who has tons of oil.

It’s about cost. It costs $30/ barrel on average to get a barrel of oil out of the ground in the US. In Saudi Arabia it costs $8 / barrel
This makes it harder to sell your own oil on the international market

In addition to differing prices (buy low sell high etc), it can also be a component of trade deals (i.e. a non-optimum oil exchange might be traded for trade agreements in something else, or even political support)

the other thing to consider is that oil isn’t oil – by which I mean the composition and grade varies widely. Heavy crude would require additional refining facilities to turn it into the most usable products, and the yield tends to be a bit lower than light, sweet crude, which is more easily turned into petrol and diesel (just for example)

for this reason countries may specialise in refining, so they import heavier liquids, refine them (where they get efficiency due to specialising) and then export the refined liquids at a higher price – singapore is a good example of this, as they have only modest reserves of oil natively, however are about the 3rd or 4th largest refined oil exporters in the world

**Please read this entire message**

Your submission has been removed for the following reason(s):

* ELI5 requires that you search the sub for your topic before posting.

There are absolutely no exceptions to this rule.

Users will either find a thread that meets their needs or find that their question might qualify for an exception to rule 7.

Please see this [wiki entry](http://www.reddit.com/r/explainlikeimfive/wiki/how_to_search) for more details (Rule 7).

If you would like this removal reviewed, please read the [detailed rules](https://www.reddit.com/r/explainlikeimfive/wiki/detailed_rules) first. If you still feel the removal should be reviewed, please [message the moderators.](http://www.reddit.com/message/compose?to=%2Fr%2Fexplainlikeimfive&subject=Can%20you%20review%20my%20thread?)