Oil is extremely cheap right now. Saudi Arabia could change that, but former U.S. Secretary of State Madeleine Albright predicts the Saudis won't act to hike prices.
"It's very hard to watch, I have to say, in terms of rational thinking," Albright said in an exclusive interview with CNNMoney on the sidelines of the Albright Institute at Wellesley College.
Oil prices hit a 13-year low in January. Crude oil trades for a mere $30 a barrel -- about the same price as the popular game Cards Against Humanity.
Saudi Arabia desperately needs oil prices to go back up. It's hemorrhaging cash and having to borrow money. If Saudi Arabia cut back on its oil production, prices would likely shoot up. But Albright says the Saudis won't do the seemingly rational option.
"From everything I know about the Saudis, they are pretty clear about the fact that they need that market share. If they give it up, then they will not get it back," she said.
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The Saudis aren't just worried about prices now, they are deeply concerned that America could become oil independent in the coming years, Albright says.
Countries like Russia, Venezuela and Nigeria can't hold on much longer at these low prices. They are putting immense pressure on Saudi Arabia to scale back on oil production.
"I have not seen anything like this. It's fascinating," Albright says of the internal battle going on within OPEC.
For decades, Saudi Arabia was the kingmaker of the oil market. It was the world's top oil exporter and the clear leader of OPEC. When Saudi Arabia stopped pumping oil, prices went up. And when it drilled more, the rest of OPEC followed its lead and prices went down.
But the entire dynamics of the energy market have changed due to an explosion of energy production by the United States in recent years. America is now the top producer of oil on the planet. The Saudis are now in second place.
The world is waiting to see who will blink first and stop pumping so much oil: The Saudis or the United States.
Related: Saudi Arabia faces 'economic bomb' and hikes gas prices 50%
For now Saudi Arabia continues to produce oil at record levels. It's no secret that it hopes to drive some U.S. energy firms out of business, which is already happening. Low oil prices also hurt its arch-enemy in the region: Iran.
But the Saudis are taking a huge hit too. The House of Saud uses its oil wealth to provide many benefits to the people such as no income tax, free health care and heavily subsidized gas, water and electricity.
"Much of the way they run their country depends on the way they distribute the oil," says Albright.
Now the House of Saud faces a funding crisis. The country ran a budget deficit in 2015 and is facing one again this year.
In a telling sign of what's likely coming, the Saudis hiked gas prices 50% at the start of the year. The Saudis used to enjoy some of the cheapest gas in the world.
