We usually think about oil prices from the perspective of consumers, but it can also be useful to think about the incentives faced by producing countries. A country like Kuwait has a fixed amount of total oil, and a level of recoverable oil that varies depending on price and technology. Oil is the most lucrative product the state can provide on a global level. There are thus serious concerns about what would happen if production began to decline terminally.
Expectations are also critical. If I expect oil prices to keep rising, it may make sense for me to pump less. After all, I can earn more per barrel for it later. All the oil that got pumped at $10 a barrel a few years ago could have contributed a lot more to consumption and investment at today’s prices. Conversely, if I expect this to be a short-term shock, my interest is to pump as much as I can and sell it for sky-high prices.
Producer incentives thus create both a positive and a negative feedback. In situations where oil is running short (and producers know it), the incentive is to cut supply even further to take advantage of higher future prices. In situations where producers consider present prices to be an aberration, the incentive is to glut the market and thus depress prices even more when they do start to fall.
Of course, the oil supplying states are probably just as concerned with keeping their real reserves and production potential secret from one another as they are concerned about hiding it from consumer states. As such, states like Russia and Saudi Arabia that might be lying publicly about their reserves cannot be entirely certain whether other parties are lying as well, and to what extent.