[Stateside Twins' Eyeshot]Freedom in Destruction

In early 1986, Saudi Arabia discontinued selling its oil at official prices and switched to a market-based pricing system called netback pricing--that guaranteed purchasers a certain refining margin. In doing so, Saudi Arabia recaptured a significant market share from the rest of OPEC. The sharp rise in crude oil supplies precipitated the crash of spot prices from an average of US$28 per barrel in 1985 to US$14 per barrel in 1986.