Your correct that they can change the price of oil to meet whatever alternatives become available. But inexpensive alternatives to oil are already available, and for some of those alternatives, the price will continue to fall, and distribution systems will continue to be improved.

Eventually this will force the Saudi's to lower the price of oil to compete with the falling price of the alternatives.

Coal, natural gas, Ethanol, Methanol, Hydrogen, etc. are all examples of alternatives to Saudi Oil.

Yes the Margins for the alternatives will be razor thin. But the margins for the Saudi oil will also be squeezed. (Unless we decide not to develop alternatives at all...Then the Saudi's will hold all the cards: Which just isn't going to happen. They do not hold all the cards)

Scott

P.S. Could it be that the US government's ethanol subsidy program is what keeps World oil prices in relative check? In the Midwest, Mid-Grade 89 Octane gasoline (with ethanol blended in) sells for 5-10 cents a gallon less than lower grade 87 Octane gasoline.