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OPEC’s Worried About the Price of Oil
By JLP | September 26, 2006
We knew this was going to happen.
The members of OPEC have gotten used to $70 oil. Now that prices have fallen, OPEC wants to cut oil production in hopes of keeping the price propped up. This statement from the article doesn’t make sense to me:
OPEC President Edmund Daukoru told Reuters on Tuesday the slide in prices was harming investment and that “something needs to be done.”
“We are already talking among ourselves in the OPEC fold. The price is very low, and it’s not good for investors,” he said after a meeting with diplomats in Abuja, the capital of Nigeria.
The price is very low? It’s still at least 100% HIGHER than the $30 per barrel that OPEC was happy with just a few years ago. Now $60 per barrel is too low?
Topics: Business News | 5 Comments »
September 26th, 2006 at 5:04 pm
They’re having the same problem anyone has when they’ve adjusted to a higher level of income. It’s always easier to increase spending than to decrease it.
This is especially true if you’re using oil money to buy off important groups in your country and stave off coups or revolutions, as the leaders in Iran and Venezuela are doing.
September 27th, 2006 at 8:44 am
Unfortunately, prices need to stay high! A high oil price is the only way we will wean ourselves away from OPEC! If prices had stayed high in the 70’s, we would now be driving hydrogen cars and the Arabs would be killing each other instead of us.
September 27th, 2006 at 10:52 am
Prices are a function of the marketplace. While there are actions that both suppliers and consumers can take that will move them up or down, they cannot be arbitrarily set.
Fundamentally, what is meant by saying that prices are set by supply and demand is both incredibly simple and enormously complex. The current price is the price at which the consumers are willing to buy the same amount as the suppliers are willing to sell.
The problem for both suppliers and consumers is that the supply and demand curves both move around over time, changing the price and volume at which they meet. If gasoline prices stay high long enough, people buy more fuel efficient cars. Demand at a given price falls. If the price falls below the cost for some suppliers, it isn’t worth it for them to pump or ship it.
September 27th, 2006 at 4:48 pm
I blame Exxon and the Bush administration for these oil prices!
September 27th, 2006 at 4:54 pm
Sam,
Since people were blaming Bush for the high oil and gas prices, will they give him credit for the lower prices? So far democrats are being quiet on this issue.