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Wikipedia says that Ronald Reagan persuaded Saudi Arabia to rise oil production so to drop the prices and make pressure on the Soviet economy. I encountered such claim in many other sources as well.

But if we look at the oil production plot enter image description here

we can see that in 1982-1988 there was actually a drop in oil production by Saudi Arabia while the USSR had the peak of oil production at the same time. Saudi Arabia increased production only after the production by the USSR dropped in the end of 1980s.

So was not it actually the USSR who dropped the prices, and not Saudi Arabia?

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Neither USSR, nor Saudis, could not "drop the price". They could only change the output, with the available supply in total affecting the price. Thus your question (while great) answers itself. – DVK Dec 27 '11 at 15:33
up vote 4 down vote accepted

I will stick to the "spirit" of your question, not to the title; I presume that you are interested in contribution of Saudi Arabia versus USSR to the oil crisis, and not in the details of Reagan's personal involvement.

Side note regarding the chart: the chart is not very useful for the purposes of this discussion as it does not show relevant metric. The oil price did not depend on Soviet production, because most of this production was sold at a fixed price (domestic and Eastern bloc supply); being traded outside the market, it could not possibly impact the market price. The oil price was impacted by Soviet export to free-market countries, and of course, by the overall demand. Both values are not shown on the chart. I find this much more enlightening, see page 7.

Back to the point. The same source that backs up said Wikipedia article says "We are certain about the date [...] September 13, 1985 [...] in the next 6 months oil production in Saudi Arabia increased dramatically." This increase in production can be seen in your chart, so there is no contradiction here. The oil price dropped between December 1985 and March 1986, and it seems that all sources attribute it to OPEC (which includes Saudi Arabia).

As of the export from USSR to the West (of which oil was the most significant part) I see:

  • when counted in rubles export decreased in 1985 and plummeted in 1986 to never recover, source

  • when counted in barrels actually have risen in 1986, 1987, and 1988; source - page 7

  • when counted in barrels export was approx. 1.5 mbd, which was not very much - Saudi Arabia alone had 4-5 mbd. Ibid. USSR was the major producer but had a minor free-market share.

So it does seem that USSR did not try (did not want? had no capability?) to bring the market price up. This was obviously to their disadvantage.

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Although exports to non-socialist countries dropped with 6 million rubies in 1986, so did imports. I'm not convinced this is depending on oil price, although it certainly is possible. – Lennart Regebro Dec 29 '11 at 5:01
Is it a rocket science? Count it yourself. Price of 1 barrel was about 25 USD in 1985. Rubel rate was 100 RUB = 77 USD. – kubanczyk Dec 29 '11 at 7:56
No need to be rude. – Lennart Regebro Dec 29 '11 at 8:29
OK let me rephrase. If I wanted to be convinced I would just count it myself. – kubanczyk Dec 29 '11 at 8:40
You are the one writing an answer. It should be in your interest to make it good, complete and convincing. – Lennart Regebro Dec 29 '11 at 8:48

This is almost more of an economics question.

The thing is, Oil prices at the time had a much more drastic effect on the US economy than the Soviet one, so you don't really have to look outside of US borders for reasons.

Rising Oil prices were almost single-handedly responsible for getting Regan elected. When oil prices go up, the price of everything in the USA rises due to the vast distances involved in shipping things around our continent. This caused a never-before-noticed effect in the USA economy which they had to invent a new word for: stagflation. Normally unemployment and inflation vary inversely to each other. Eg: if a recession happens, people lose jobs, but inflation drops too. During an economic boom, the opposite happens.

However, during the Carter administration there was a big Oil production slowdown, and the result was both inflation and unemployment got worse. The government didn't much know what to do about this, because their typical solution for one would make the other worse.

Regan got elected because of this, so quite sensibly it was a very high priority of his to stop the Oil slowdown. USSR or no, he'd really like to be re-elected.

I know there's a tendency now to grasp whatever straws available to paint Regan as the cunning genius who brought down the USSR. Having lived through it myself (and watched the guy's press conferences and speeches), I'll tell you it was much more like living through a live action Mr. Magoo cartoon. He may still deserve the credit, but the guy was just trying to drive his car...

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After living through these times myself I concur, regardless of economics people felt that after Carter the economy was spiraling down and in US elections the response usually is vote the guys in - out. heh...Mr. Magoo, nice one. – MichaelF Apr 7 '12 at 9:56

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