OPEC's cuts mean no oil shortage.
In a condition where the supply of a commodity exceeds demand, the price for the commodity must fall. That is just what has been happening with oil. There never was a shortage of oil, per se. The shortages were in refined fuels and were made possible because of a series of bad policy decisions that have, over the years, led to reduced refinery capacity and laws calling for the production of relatively small batches of "boutique fuels" tailored to small geographical markets. That there was and still remains enough crude oil is reflected in the fact that oil prices continued to fall even after the OPEC announcement.
In fact, wrote Raymond J. Learsy, author of the book Over a Barrel: Breaking the Middle East Oil Cartel, "something unusual happened. Not only did the spot market prices not go up, they actually fell by $1.68/bbl or 2.7%! For once the oil consuming public long conditioned these past years to react with Pavlovian obedience to every OPEC and oil industry's pronouncement that peak oil is at hand, that oil will soon be running out, has, at last, taken a different tack. Why? I believe the market is finally recognizing that oil at current levels is not scarce."
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|Title Annotation:||Organization of the Petroleum Exporting Countries|
|Publication:||The New American|
|Article Type:||Brief article|
|Date:||Nov 13, 2006|
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