Ideas that would be more ridiculous:
1. The major economies buy up all the oil in the world that will ever be produced (including any fields not yet discovered) and just sit on them.
2. We blockade every oil producing nation on the planet (including the United States until our own runs out) and stop them from shipping the oil.
3. We bribe every sovereign in the world to not buy oil.
4. We sneak a line in every major religious text in the world to the effect of "HOLY PERSON OF CHOICE spake: and the black liquid that burns is evil"

If Saudi Arabia was serious about diversifying its economy, it would open up its spigots and let the price of oil fall to the point where there were market incentives for economic diversification. Somehow, I don't see that happening.

Indeed. As is, they've diversified to a lesser degree than the UAE, for example, which is why I'm feeling some serious schadenfreude at their terror over what climate change regulations and a shift-away from oil dependency will do to their economic rent-based economy.

I honestly can't think of a more deserving government to have this happen to. The Saudis have used that money to spread Wahhabism and fanaticism all over the muslim world, as well as a life-style at home that seems to mainly consist of drinking coffee while imported foreigners do all the labor.

Readers are encouraged to proffer their own proposals in the comments that would seem more outlandish than the Saudi one.

Let's see. How about

1. Yearly compensation from the Chinese equal to the jobs displaced by their imports.

2. Compensation from Hugo Chavez for not buying American military hardware anymore, equal to the value of the hardware he would have bought if he was buying "American."

3. Compensation from Mexico and Latin America equal to the housing and aid costs of all their immigrants, legal or illegal.

4. Compensation from all the non-nuclear countries equal to the estimated amount they would be paying for uranium imports if they were buying uranium and nuclear technology from the US.

5. Compensation from Saudi Arabia equal to the entire cost of providing security to the regime from the Gulf War onward.

6. Compensation equal to all US military expenses in Europe since World War 2 as part of NATO.

I say that we offer them no compensation for the potential loss of business. This is because Saudi is in a fundamentally weak position now. Their two main options for influencing the West and the world are both bad.
A. They reduce the supply of oil, thus trying to bring the rest of the world into submission.
This plan is inherently flawed because it will make the market more appealing to alternative energy companies and hasten oil's demise.

B. They increase the supply of oil, hoping to destroy the nascent green energy market, and then slowly move prices back to the point where they have higher profit margins.
The west can then simply control the amount of oil bought by adding its own price level type taxes that make sure that gas doesn't go below, say, $3 per gallon. Or they could make it so that MPG requirements are so high that the demand will drop regardless of the price. Either way, Saudi and other OPEC nations will end up with diminishing revenues.

At this point, it would almost be better for Saudi to claim that a drop of revenue will lead to unrest and request aid by presenting a diversification plan that would combine oil profits and foreign capital to create alternative sectors in its economy.

The West could also always try to use this as an opportunity to lock in an oil price. This price could be set relatively low, and would help remove some of the volatility of the energy market. A set price would be extremely beneficial for alternative energy investment, because for once companies would have a solid benchmark to beat, and could entice potential investors with projections of sub-oil priced kilowatts.

Saudi Arabia has a large, but finite amount of oil. Environmental regulation and green energy that limit the use of oil is actually a good thing for them. Political and economic pressures won’t allow Saudi Arabia to limit production. With no advances in green energy tech (or environmental regulation) they would be out of oil – and out of an income source – sooner.

Also, from the NYT article you cite above,
“Last year, when prices peaked, the kingdom’s oil revenue swelled by 37 percent, to $281 billion . . . Saudi exports are expected to drop to $115 billion this year, after oil prices fell . . . The one-year swing in the kingdom’s revenues shows that oil prices are likely to be a bigger factor in Saudi Arabia’s future that any restrictions on greenhouse gases, said David G. Victor, an energy expert at the University of California, San Diego.”

The problem, and perhaps part of their solution, is unstable prices. Yes, they should diversify; with the help of green tech and environmental restrictions they will have oil, and be able to afford to finance the transition, for a long time to come.

I think the best proposal to cut greenhouse gases is to get all the countries most vulnerable to global warming to pay the biggest emitters of greenhouse gases, as they have to do the most to cut their gasses. Since the biggest beneficiaries of cutting the greenhouse gases are countries like Maldives, Bangladesh, etc. they should pay biggest emitters like USA, Australia, Europe, etc. to cut the gases. This is the most equitable way of dealing with the problem.

This should be the default negotiating position of the West, I really wonder why they haven't thought of this before!!

Bail them all out. Buy B rated shares and force them to be premium simultaneously taking over the country. We can have someone from the EPA run their countries while we have the boys from Climate Change arrest their from leaders for negligence/racketeering/Dumping/profiteering/Child Endangerment/etc. Snap! Paulson and the treasury can have turf wars now with the EPA. You can call the whole thing as the 'CRaP-FC aid package' or the Commodity Rescue and Preservation - Funded by the Chinese.

Now to be serious. I was for the Tarp, but it was implemented slightly wrong. US GOV made money off it as well. This above was merely my answer to creativity.

As for the saudies and the other gulf regions; well they are threatened in the long run, and they want to set a precedent for them to get more in the long run. Bahrain lost oil a while ago, and they had relatively little time to diversify, look at them going strong. Dubai lost their oil a long time ago as well, look what they build in a matter of years (forget the fact Abu-Dhabi bailed them out a few months back). Qatar ran out of oil, figured out the had a lot of Natural Gas and went that way (it is still diversification no matter how small it is). Look at Iraq, even they diversified, exporting 2nd hand weapons, scrap metals, 1960's cars, and violence (ohhhh snap again! im on a roll today). Now for the jewel in the crown, the people with the balls to say they want money for the world going green, the saudies. They have more research into hydrocarbon and alternative energy than pretty much all the other oil companies (possibly combined). They have had it for years. They have serious money (ARAMCO cash) in serious companies (ARAMCO and subsidiaries) providing a serious service. google aramco. They make so much money a year its crazy. I wouldn't worry about the saudies too much, they have started already diversifying but they choose not to tell anybody (for example; it was them who paid off the pirates when that Vera Supertanker was stolen). Plus, they will always have the HAJJ and Umra, serious money making industry by the way.